U.S. stock markets closed the week with mixed results. The Nasdaq Composite continued its upward trajectory, marking its fourth consecutive week of gains, while the S&P 500 and Dow Jones Industrial Average experienced weekly declines. This subdued Friday session saw the major indices finish near the unchanged mark, with Broadcom’s impressive forecast taking center stage.
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Broadcom’s projection of exceeding Wall Street revenue expectations and its anticipation of significant growth in AI chip demand sent its shares soaring by 24%. This surge propelled the company’s market capitalization beyond $1 trillion, a significant milestone.
While Broadcom’s success reverberated throughout the tech sector, chip stocks presented a mixed picture. Competitor Marvell Technology saw a 10.8% increase, while AI leader Nvidia experienced a 2.2% decline. Despite these variations, the overall semiconductor stock index showed a healthy gain of 3.2%.
Concurrently, yields on U.S. Treasury bonds rose across the board, with the 10-year Treasury note reaching a three-week high. This rise in yields reflects the ongoing tension between the technology sector’s growth and the broader market’s sensitivity to interest rate fluctuations. According to Jay Hatfield, CEO of Infrastructure Capital Management, “Right now the interest rate selloff is winning. It’s pretty natural for value and income stocks to go down when tech stocks are rising.”
Nasdaq Surpasses 20,000 Milestone Amidst Tech Sector Strength
The technology sector’s continued strength propelled the Nasdaq Composite above the 20,000 mark for the first time on Wednesday. This milestone, coupled with an inflation report that met expectations, reinforced predictions of a 25 basis-point interest rate cut by the Federal Reserve in its upcoming meeting.
Current market expectations, as indicated by CME’s FedWatch Tool, place the probability of a rate cut at the December 17-18 meeting at nearly 97%. However, there are also indications of a potential pause in rate cuts in January.
Market Performance and Weekly Trends
The Dow Jones Industrial Average closed at 43,828.06, down 0.20% or 86.06 points. The S&P 500 remained virtually unchanged at 6,051.09, losing a negligible 0.16 point. In contrast, the Nasdaq Composite gained 23.88 points, or 0.12%, to close at 19,926.72.
Despite recent market gains and positive economic data, both the S&P 500 and the Dow experienced weekly losses. This pause followed a period of sustained growth driven by investor enthusiasm for artificial intelligence and the strong performance of major technology companies. The Nasdaq, however, bucked this trend and finished the week with a positive performance.
Beyond the tech sector, RH, a home furnishings retailer, saw a significant 16.95% jump in its stock price following a strong third-quarter revenue report. Conversely, homebuilder D.R. Horton experienced a 0.89% decline after a downgrade by J.P. Morgan.
Market Breadth and Trading Volume
Overall, declining stocks outnumbered advancing stocks on the New York Stock Exchange by a ratio of 2.23 to 1. Trading volume across U.S. exchanges totaled 12.56 billion shares, slightly below the 20-day average of 14.03 billion shares. The S&P 500 recorded 8 new 52-week highs and 15 new lows, while the Nasdaq Composite registered 75 new highs and 199 new lows.
In conclusion, the week’s trading activity highlighted the ongoing market dichotomy between technology sector strength and broader market uncertainties surrounding interest rate movements. While Broadcom’s trillion-dollar valuation underscored the tech sector’s continued momentum, the Dow and S&P 500’s weekly declines suggest a more cautious outlook for the overall market. The Federal Reserve’s upcoming meeting will likely play a crucial role in shaping market sentiment in the coming weeks.
