The major U.S. stock indexes concluded a volatile week with a mixed performance on Friday, as the S&P 500 ended virtually flat, marking its first weekly decline after three consecutive weeks of gains.
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The S&P 500 wavered between minor gains and losses throughout the day, ultimately closing down less than 0.1%. This slight dip halted the benchmark index’s recent upward trajectory. Meanwhile, the Dow Jones Industrial Average slipped 0.2%, while the tech-heavy Nasdaq composite managed a modest 0.1% increase, closing just shy of its record high set on Wednesday.
Declining stocks outnumbered advancing ones on the New York Stock Exchange by more than a two-to-one ratio. However, gains in the technology sector helped offset losses in communication services, financials, and other sectors.
Broadcom’s Surge and the AI Influence
Semiconductor giant Broadcom led the S&P 500 with a remarkable 24.4% surge after exceeding profit expectations and issuing an optimistic forecast, highlighting its artificial intelligence (AI) products. The company also announced a dividend increase. Broadcom’s significant gain played a crucial role in mitigating the broader market decline. The high valuations of technology companies like Broadcom give the sector substantial influence on overall market movements.
The increasing focus on AI technology has been a major driver for the technology sector and the broader stock market throughout the past year. Both tech companies and Wall Street anticipate that the growing demand for AI will continue to fuel growth in semiconductors and other related technologies.
Tech Giants and Other Notable Movers
Despite the overall positive impact of the tech sector, some prominent tech stocks experienced declines. Nvidia fell 2.2%, Meta Platforms dropped 1.7%, and Google parent Alphabet slid 1.1%.
Among other notable decliners, Airbnb experienced the largest loss in the S&P 500, falling 4.7%, while Charles Schwab closed 4% lower. On the upside, furniture and housewares company RH (formerly Restoration Hardware) surged 17% after raising its revenue growth forecast for the year. In total, the S&P 500 closed at 6,051.09, the Dow finished at 43,828.06, and the Nasdaq ended at 19,926.72.
Federal Reserve and Economic Outlook
This week’s market hesitation stemmed from mixed economic data and anticipation of the Federal Reserve’s final meeting of the year, scheduled for next week. The central bank is widely expected to implement its third interest rate cut since September. Market expectations for a series of rate cuts have propelled the S&P 500 to numerous record highs this year.
The Fed’s current easing cycle follows an aggressive period of rate hikes aimed at curbing inflation. Rates were raised from near-zero in early 2022 to a two-decade high by mid-2023. These measures successfully brought inflation down closer to the central bank’s 2% target. Despite the pressure from inflation and high borrowing costs, the economy has remained resilient, with strong consumer spending and employment figures. However, a slowing job market has contributed to the shift in the Fed’s monetary policy.
Recent months have seen a slight uptick in inflation rates. November’s consumer price index rose to 2.7% from 2.6% in October. The Federal Reserve’s preferred inflation gauge, the personal consumption expenditures index, is due next week and is projected to show a 2.5% increase in November, up from 2.3% in October.
Economic Resilience and Lingering Uncertainties
Economists generally agree that the economy remains robust heading into 2025, supported by continued consumer spending and healthy employment levels. However, uncertainties related to regulatory, immigration, trade, and tax policies cloud the outlook. Treasury yields edged higher, with the 10-year Treasury yield rising to 4.40%.
European markets experienced declines, with Britain’s FTSE 100 falling 0.1% following news that the UK economy unexpectedly contracted in October. Asian markets also closed mostly lower. Despite the mixed performance this week, the underlying strength of the U.S. economy and the anticipated actions of the Federal Reserve continue to shape market expectations for the coming year.
