By Gunjan Banerji and Caitlin Ostroff
Declines in shares of technology companies helped push the
S&P 500 to a third consecutive week of losses, capping another
tumultuous stretch for the stock market.
Friday's moves continue a recent spell of volatility during
which major U.S. stock indexes have quickly retreated after
marching upward throughout the summer. Tech heavyweights that
powered the market higher this year are now dragging it down.
Apple, Google-parent Alphabet and other tech companies continued to
Stocks had jumped to start the week, recouping some of their
losses from the prior two weeks -- when the S&P 500 and Nasdaq
Composite recorded the worst two-week declines since March. But the
gains proved to be short-lived. All three major U.S. indexes
notched their third consecutive week of losses.
The S&P 500 has lost 5.4% over the last three weeks, the
biggest percentage decline over that time frame since June. The
Nasdaq Composite has fallen 7.7% over the last three weeks, the
biggest such decline since March.
"We're at an inflection point," said David Malmgren, senior
portfolio manager at FBB Capital Partners. "I think there could be
a little bit more downside."
The S&P 500 slipped 37.54 points, or 1.1%, to 3319.47 on
Friday. The tech-heavy Nasdaq Composite lost 116.99 points, or
1.1%, to 10793.28. The Dow Jones Industrial Average shed 244.56
points, or 0.9%, to 27657.42.
Also adding to the stock swings this week were projections the
Federal Reserve released Wednesday. The central bank said that the
economic outlook remains highly uncertain and signaled it would
keep interest rates near zero for at least three more years.
Some investors were disappointed that the central bank didn't
offer more guidance around additional stimulus measures or
specifics about its inflation targets.
Now, many are anticipating more volatility in the coming months,
particularly around the U.S. election and a potentially rocky
earnings season. Investors are already girding for weeks of
uncertainty following the election. Meanwhile, analysts expect
earnings for the third quarter to drop by 22% from the year prior,
the second largest such decline in earnings since 2009, according
to FactSet data.
Democrats and Republicans remain at an impasse over another
round of coronavirus relief. The breakdown in negotiations has
disappointed some investors who expected another relief package
would lend more spending power to Americans and boost an economic
recovery. Additional support could bolster consumer spending, which
powers two-thirds of the U.S. economy.
Data released Friday showed that consumer sentiment in the U.S.
increased more than expected in early September, though confidence
among Americans remained at depressed levels.
Investors are also watching for progress in Covid-19 vaccine
trials and monitoring economic data to assess how much stocks can
climb, following a rebound from March lows.
"If you think about it, we've had all the easy gains," said
Altaf Kassam, head of investment strategy for State Street Global
Advisors in Europe. "It's going to get incrementally harder for us
to keep pushing up that hill."
Still, one of the biggest sources of uncertainty is whether the
recent downturn in tech will turn into a prolonged period of
The big tech companies have outsize influence on the S&P 500
given their towering market valuations. In one sign of the reversal
at play, a version of the S&P 500 that gives every company an
equal weighting edged higher 0.7% this past week. The standard
index slipped 0.6%.
"I think that's the question the whole world is asking...is this
the great rotation from tech and growth to maybe some sort of
value," said Peter Giacchi, head of designated market maker floor
trading for Citadel Securities.
Shares of Alphabet and Apple dropped 4.3% and 4.6%,
respectively, this week. Amazon.com and Facebook shed 5.2% and
5.3%, respectively. Netflix lost 2.5% for the week.
Also hanging in the backdrop Friday was the occurrence of
so-called quadruple witching -- when both futures and options
linked to individual stocks and stock indexes expire on the same
day. A surge in options trading targeted at giant technology stocks
by both small and large investors has also been magnifying the
market's ups and downs in recent days.
There were some standout winners, too, highlighting some of the
unusual market dynamics this year. Sports-betting company
DraftKings surged 34% this week to $55.39, a new high, after it
said it entered a new deal with ESPN. Data-warehousing company
Snowflake had a banner initial public offering. Shares skyrocketed
Wednesday, its first day of trading, highlighting investors' desire
for growth despite the recent tumble in technology shares. They
gained $12.46, or 5.5%, to $240.00 Friday.
Overseas, the pan-continental Stoxx Europe 600 fell 0.7%
In Asia, China's Shanghai Composite Index led regional gains,
with a more than 2% rise by the close of trading, helped by rallies
in financial stocks. Foreign investors have added to their holdings
of Chinese stocks, helping bolster the yuan, which in recent days
has hit its strongest levels against the dollar since May 2019.
Elsewhere, major indexes in Hong Kong, Japan and South Korea
advanced less than 0.5%, while the Australian benchmark edged
--Joanne Chiu in Hong Kong contributed to this article.
Write to Gunjan Banerji at Gunjan.Banerji@wsj.com and Caitlin
Ostroff at email@example.com
(END) Dow Jones Newswires
September 18, 2020 17:18 ET (21:18 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.