© Reuters. FILE PHOTO: Traders work on the floor at the New York Stock Exchange (NYSE) in New York City, U.S., March 5, 2024. REUTERS/Brendan McDermid/FILE PHOTO
By Caroline Valetkevitch
NEW YORK (Reuters) -U.S. stocks fell on Friday, led by technology-related megacaps that have propelled this year’s rally, while investors weighed the interest rate outlook ahead of next week’s Federal Reserve meeting.
Traders have reined in bets of a June rate cut by the Fed after this week’s hotter-than-expected inflation data.
Shares of Adobe (NASDAQ:) dropped after it forecast second-quarter revenue below analysts’ estimates, following stiff competition and weak demand for its artificial intelligence-integrated photography, illustration and video.
The technology index was down on the day, with Microsoft (NASDAQ:) among the biggest drags.
An index of semiconductors was down for the week. The Nvidia (NASDAQ:) GTC developer conference scheduled for March 18 to 21 will be watched closely for AI-related announcements.
“We seem in a period here where everyone knows rates eventually will be lowered. The expectation of when it happens keeps getting slightly pushed back, but investors still believe it will happen,” said Rick Meckler, partner at Cherry Lane Investments in New Vernon, New Jersey.
“It’s been a back-and-forth market as people reposition and consider whether some of the real winners have just gone a little bit too far, so you’re seeing them trade off.”
According to preliminary data, the S&P 500 lost 33.06 points, or 0.64%, to end at 5,117.42 points, while the Nasdaq Composite lost 152.66 points, or 0.96%, to 15,975.86. The Dow Jones Industrial Average fell 185.58 points, or 0.48%, to 38,720.08.
Friday also marked the simultaneous expiry of quarterly derivatives contracts tied to stocks, index options and futures, also known as “triple witching,” which can boost trading volumes and exacerbate volatility.
The week started with investors’ options positions leaning toward call contracts – typically bought to express a bullish bias, said Kochuba, founder of analytic service SpotGamma. However, the S&P 500’s failure to rise quickly eroded the value of upside call options, putting further downward pressure on the market, he noted.
While Wall Street’s AI-driven rally has stalled, the S&P 500 remains up about 7% for the year to date.
Among data released on Friday, production at U.S. factories increased more than expected in February, but the January figure was revised sharply down as manufacturing remains hamstrung by higher interest rates.
Also, the University of Michigan’s preliminary reading on the overall index of consumer sentiment came in at 76.5 this month, versus an estimated reading of 76.9.
All eyes are now on next week’s Fed meeting and any clues on the central bank’s outlook for rate cuts.
Among other declining shares, Ulta Beauty (NASDAQ:) fell after forecasting full-year profit below Wall Street estimates, as elevated supply-chain costs and increased promotions hurt its margins.
