Stocks fell on Friday as Wall Street braced for the close of a tumultuous week dominated by shifting expectations about the Federal Reserve’s interest rate policies.
The S&P 500 and the tech-heavy Nasdaq Composite both fell about 0.3%. Meanwhile, the Dow Jones Industrial Average fell 278 points, or 0.7%, signaling a broader market pullback.
The decline marks another day of widespread losses. However, the market is trending toward sectors that stand to benefit most from potential Federal Reserve rate decisions, such as small-cap stocks.
The S&P 500 is down more than 1% this week, on pace for its worst performance since April. The Nasdaq is down nearly 3%, jeopardizing a six-week winning streak. By contrast, the Dow is up about 1% and the small-cap-focused Russell 2000 is up more than 2% through Thursday’s close.
“The stock market is undergoing a much-needed rotation,” said Glen Smith, chief investment officer at GDS Wealth Management. “Investors are shifting funds out of healthy big tech stocks and into other sectors of the market.”
The shift has been welcomed by some Wall Street analysts who have worried that the market rally has relied too heavily on a few big tech companies. The shift away from megacap AI stocks may explain the Nasdaq’s underperformance this week and why the tech sector has dragged down the broader S&P 500.
“The headline is ‘these are down’ with some of the upside stocks getting hit,” Chris Verrone, head of technical and macro research at Strategas, said on CNBC’s “Squawk Box.” However, “the breadth beneath the surface these last couple of weeks has been absolutely spectacular.”
Adding to the market’s woes, CrowdStrike saw its shares plunge more than 9% following a major technology outage that disrupted trading globally. While trading on the New York Stock Exchange and Nasdaq appeared unaffected, the London Stock Exchange Group reported that its real-time Russell indices were not accessible externally.