Stocks got hit at the end of a wild week, with results from tech giants set to arrive at a critical moment on Wall Street.
Tech led losses in the S&P 500 Friday, with the gauge poised for its worst week since April. That's after a "rotation" that saw investors trimming positions on this year's winners in favor of laggards.
Underpinning that trade were bets the 2024 rally would broaden out of megacaps as the Federal Reserve cuts rates. The swift repositioning spurred calls for a pullback that engulfed various sectors alongside tech in the run-up to the industry's earnings.
"Next week is important for the near-term trajectory of the stock earnings, with many megacap tech companies reporting," said Glen Smith at GDS Wealth Management. "If we were to see the powerful combination of strong tech earnings and softening inflation, that could reverse the market's recent weakness and spark a new leg higher in stocks."
After the selloff, the "Magnificent Seven" cohort of megacaps is ending the week with a 5% slide. Within the overall tech space, losses have been more pronounced in chipmakers.
A closed watched gauge of semiconductors like Nvidia Corp. and Intel Corp. has tumbled 8.5%. Even as investors cooled down on the rotation trade, small caps have gained about 2% in the span.
In what will go down as the most spectacular IT failure the world has ever seen, a botched software update from cybersecurity firm CrowdStrike Holdings Inc. crashed countless Microsoft Corp. Windows computer systems globally. Both companies have rolled out fixes and systems are being restored.
The S&P 500 dropped to around 5,500. The tech-heavy Nasdaq 100 fell 1%. The Russell 2000 Index of smaller firms slid 0.5% after resuming ticking in the wake of a third-party technical issue.
CrowdStrike sank as much as 15%, before paring losses. American Express Co. slipped after warning of higher marketing spending amid a slowdown in billings growth. Treasury 10-year yields advanced three basis points to 4.23%. The dollar fluctuated.
Tesla Inc. and Alphabet Inc. will be the first of the "Magnificent Seven" megacaps to report earnings on Tuesday.
