U.S. stocks on Friday took a beat following a stunning rally the previous day. Wall Street’s benchmark S&P 500 (SP500) gauge briefly scaled the 5,100 points mark for the first time before retreating.
Equities on Thursday had posted their best day in over a year, primarily on the back of yet another blockbuster quarterly report and guidance from Nvidia (NVDA) that surpassed even the loftiest of expectations and sent technology and artificial intelligence-related stocks soaring. The milestones kept coming for the company, which on Friday became the first chipmaker to hit $2T in market capitalization before paring gains.
With an hour of regular trading left, the tech-heavy Nasdaq Composite (COMP.IND) was slightly lower by 0.15% to 16,017.91 points, having fluctuated through most of the session. The S&P (SP500) rose as much as 0.47% shortly after the opening bell to cross the historic 5,100 points mark. It was last up 0.10% to 5,091.98 points. The blue-chip Dow (DJI) added 0.15% to 39,129.22 points.
Of the 11 S&P sectors, eight were in the green, led by Utilities. Consumer Discretionary topped the losers.
In light of Nvidia’s (NVDA) outsized role in driving Thursday’s rally, some concerns over the weightage of megacap technology stocks resurfaced on Friday. Moreover, JPMorgan said that the gains in the market and tech stocks fueled largely by artificial intelligence (AI) mania could work against the progress made on inflation so far, which would in turn make it difficult for the Federal Reserve to cut interest rates.
“There is a very real macroeconomic challenge for the FOMC posed by AI. Speculative investment is fueling aggregate demand and creating very easy financial conditions. While Panama and AbbVie (ABBV) have nothing to do with AI, their bond sales yesterday benefitted from the huge decline in corporate bond risk premiums that strong equity market price action catalyzes,” Bespoke Investment Group said.
“Don’t be surprised if very loose financial conditions fueled by AI mania end up pushing the Fed into a later cut than would otherwise be the case,” Bespoke added.
Goldman Sachs’ chief economist Jan Hatzius pushed back against his expectation of the first Fed interest rate cut to June from May, in the wake of comments this week from central bank officials and the minutes of the January monetary policy committee meeting.
“The Fed would prefer to risk waiting too long to lower rates — significantly weakening the economy or even precipitating a recession — than risk cutting rates too soon and allowing the economy and inflation to rev back up. This is a difficult policy needle to thread, and the risk that the Fed won’t be able to manage it is the most serious threat to the good economy,” Moody’s Analytics chief economist Mark Zandi said on X (formerly Twitter) on Thursday.
Treasury yields were mostly lower on Friday. The longer-end 30-year yield (US30Y) was down 8 basis points to 4.38%, while the 10-year yield (US10Y) was down 7 basis points to 4.26%. The shorter-end more rate-sensitive 2-year yield (US2Y) was down 2 basis points to 4.69%.
See live data on how Treasury yields are doing across the curve at the Seeking Alpha bond page.
Also weighing on markets on Friday was Warner Bros. Discovery (WBD) and Booking Holdings (BKNG). Both stocks were the top two percentage losers on the S&P 500 (SP500). The media conglomerate reported a quarterly revenue miss amid an advertising slump, while the online travel agency’s results were impacted by the Middle East conflict.