Wall Street closed another hectic trading week on Friday with a large drop in stocks that left the S&P 500 with its third consecutive weekly loss.
The S&P 500 fell 1.1%, led once again by a massive sell-off of tech companies, with Apple, Amazon and Alphabet particularly weighing on the market. Tech stocks and other companies that have fueled the strong market rally this year have suddenly lost momentum this month, fearing they may have become too expensive.
The massive selloff erased the last of the solid gains the market saw at the start of the week. The S&P 500 is on track for its first monthly loss since March. September is historically the worst month for stocks.
âThe market was about to pull out, take a break,â said Quincy Krosby, chief markets strategist at Prudential Financial. âRaising capital is prudent for a month known statistically, historically, to be difficult for the market. “
The S&P 500 lost 37.54 points to 3,319.47. The drop marks the first series of three weeks of losses for the benchmark since last October. The Dow Jones Industrial Average lost 244.56 points, or 0.9%, to 27,657.42. The Nasdaq composite lost an early gain, dropping 116.99 points, or 1.1%, to 10,793.28. Small stocks also fell, with the Russell 2000 Small Cap Index falling 5.82 points, or 0.4%, to 1,536.78.
Market momentum reversed on Wednesday after the Federal Reserve said the outlook for the U.S. economy remained uncertain and policymakers expect short-term interest rates to remain at record highs until ‘in 2023. Low rates usually energize the market by encouraging investors to pay higher prices for stocks. , but some investors may have expected the Fed to be more aggressive.
Growth in some areas of the economy has also slowed after the expiration of supplemental unemployment benefits and other federal government aid, and partisan disagreements in Congress are delaying a possible renewal of support. Investors say it is essential that such help arrives.
âTo the extent that you don’t get an additional tax cushion, the economy will be affected,â said Brian Levitt, Global Markets Strategist at Invesco.
Growing tensions between the world’s two largest economies also continue to keep markets on high alert. The United States announced Friday that it will ban downloads of Chinese apps TikTok and WeChat on Sunday. He cited national security and data privacy concerns.
President Donald Trump’s targeting of the Chinese tech industry has raised intermittent concerns in the market about possible retaliation against the US industry.
Big tech stocks stumbled sharply this month over fears their prices had become too expensive as a result of their virtuoso performances during the pandemic. Rising shares of Apple, Microsoft, Amazon and others helped push Wall Street to record highs, even as the pandemic rocked much of the economy as the coronavirus accelerated working from home and other trends that benefited them.
But they suddenly lost momentum two weeks ago, dragging the market with them. Because these companies have grown so massively, their stock movements have a huge influence on major stock indexes, such as the S&P 500.
âWe’ve definitely had a bit of overbought in the short term and headed for a time of year that isn’t ideal for the markets,â Levitt said.
Several Big Tech stocks continued to fall on Friday. Apple fell 3.2%, Microsoft fell 1.2%, and Amazon slipped 1.8%.
Also on the long list of market concerns are the progression of the pandemic, the possibility of a COVID-19 vaccine actually being available in early 2021, as many investors expect, and what the election will be. US presidential election in November will do the economy.
Yields on Treasuries remain very low, a testament to the mighty strength of the Federal Reserve and the lingering expectations of bond investors for modest economic growth and inflation. The 10-year Treasury yield fell from 0.69% Thursday night to 0.70%.
A preliminary report released on Friday indicated that consumer confidence is improving at a faster rate than economists expected, which is critical for an economy where consumer spending is the main driver. But that follows other reports this week that showed retail sales growth slowed last month and the number of layoffs across the country remains stubbornly high.
One factor that may have helped make trading more chaotic than usual on Friday was an event known as “quadruple witchcraft,” which marks the expiration of futures and options on stocks and indices. The event may cause price fluctuations.
Other stock markets around the world made mostly modest moves.
In Europe, the German DAX lost 0.7% and the French CAC 40 lost 1.2%. The FTSE 100 in London fell 0.7%. Asian markets mostly closed higher.
Benchmark US crude oil fell 0.2% to $ 40.89 per barrel. Brent crude, the international standard, fell 0.8% to $ 42.95 a barrel.
AP Business Writer Yuri Kageyama contributed.