Major U.S. stock indexes closed lower on Friday, with technology shares leading the decline after a disappointing outlook from chipmaker Broadcom sparked a sector-wide sell-off. The Nasdaq Composite bore the brunt of the negative sentiment, while investors also weighed upcoming economic data on inflation and employment.
Key Takeaways
- The Nasdaq Composite fell 1.7%, leading the major indexes lower as technology stocks faced significant selling pressure.
- Broadcom (AVGO) shares plummeted over 11% due to investor concerns about profit margins and its AI business, impacting other AI-related stocks.
- EV maker Rivian (RIVN) was a standout gainer, soaring nearly 17% after announcing plans to develop its own AI chip for self-driving vehicles.
- Cannabis stocks like Tilray (TLRY) and Canopy Growth (CGC) surged more than 30% on reports of potential federal reclassification of marijuana.
Broadcom's Tumble Ignites Tech Sell-Off
A broad-based market decline on Friday was heavily influenced by the technology sector, which dropped 3% within the S&P 500. The primary catalyst was a sharp downturn in shares of Broadcom, a major player in the semiconductor and artificial intelligence space.
Despite reporting quarterly results that surpassed analyst expectations, Broadcom's stock fell more than 11%. Investors reacted negatively to the company's guidance, which raised concerns about future profit margins and the strength of its AI order backlog.
Ripple Effect in AI Stocks
The pessimism surrounding Broadcom quickly spread to other companies associated with artificial intelligence. The sell-off demonstrated how interconnected the sector has become, with one company's outlook capable of shifting investor sentiment across the board. Companies like Celestica, Lumentum, and Ciena also experienced significant declines.
Other major tech names also felt the pressure. Micron Technology and Palantir saw their shares drop by more than 5% and 3%, respectively. The downturn in tech highlights the sector's sensitivity to corporate earnings and future growth projections, especially in the high-stakes AI arena.
Pockets of Strength Emerge Amidst the Downturn
While technology stocks struggled, several other sectors and individual companies showed remarkable strength, bucking the overall market trend.
Rivian Surges on AI Chip Ambitions
Electric vehicle manufacturer Rivian was one of the day's biggest winners. The company's stock jumped nearly 17% following its inaugural "Autonomy and AI Day" event. The surge was fueled by Rivian's announcement that it plans to design and produce its own custom AI chip to power its autonomous driving systems.
This strategic move is seen as an effort to gain greater control over its technology stack and compete more directly with industry leader Tesla. Interestingly, Rivian's positive momentum did not negatively affect its competitor, as Tesla's shares also managed to close with a gain of over 1%.
Cannabis Stocks Rally on Policy Hopes
The cannabis sector experienced a massive rally following a report that the White House may be considering a significant shift in federal marijuana policy. According to the report, President Trump is exploring the possibility of reclassifying marijuana from a Schedule I to a Schedule III drug.
Such a change would place marijuana in the same category as some prescription painkillers, potentially easing federal restrictions and opening up new avenues for banking and research. The news sent shares of industry leaders Tilray Brands and Canopy Growth soaring by more than 30% each.
Market Braces for Key Economic Data
Beyond individual company news, investors are positioning themselves for a crucial week of economic reports. The Bureau of Labor Statistics is scheduled to release the employment report for November, a key indicator of the health of the labor market. Economists anticipate the addition of 119,000 jobs.
Inflation in the Spotlight
Perhaps even more critical will be Thursday's release of the Consumer Price Index (CPI) for November. This report is a primary measure of inflation and will be closely watched by the Federal Reserve. The Fed's preferred inflation gauge, the Personal Consumption and Expenditure (PCE) index, has been rescheduled for a future date.
The bond market reflected this anticipation, with the yield on the benchmark 10-year Treasury note rising five basis points to 4.19%. This upward move in yields often indicates that investors expect higher inflation or interest rates in the future.
Broader Market Performance and Outlook
By the closing bell, the Dow Jones Industrial Average had shed 0.5%, while the S&P 500 fell 1.1%. The Russell 2000 index, which tracks small-cap stocks, also declined by 1.5%, indicating that the negative sentiment was widespread beyond large-cap technology firms.
Trading volume was mixed, with lower volume on the New York Stock Exchange and higher volume on the Nasdaq compared to the previous day. Declining stocks outnumbered advancing stocks by a margin of roughly two to one on both exchanges.
In other market news, gold futures continued to perform well, rising 0.4% to approximately $4,300 an ounce, boosting gold mining stocks. Meanwhile, Lululemon saw its stock climb over 10% after delivering a strong earnings report that exceeded expectations.
As the market heads into a data-heavy week, investors will be looking for clarity on the path of inflation and the economy to guide their next moves.
