U.S. stocks declined on Friday, pushing both the S&P 500 and the Nasdaq to their lowest levels in more than two weeks, as rising Treasury yields and renewed concerns over an AI-driven market bubble weighed heavily on investor sentiment.
Treasury yields moved higher after several Federal Reserve policymakers who opposed this week’s rate cut warned that inflation remains too elevated to justify looser monetary policy.
Attention now turns to key U.S. economic data scheduled for next week, including the November nonfarm payrolls report and updated consumer inflation figures, which could offer clearer signals on the strength of the economy.
AI sector weakness drags markets lower
Shares of Broadcom tumbled 11% after the company cautioned that future profit margins could narrow, reigniting fears over the sustainability of massive AI-related investments.
David Morrison, senior market analyst at Trade Nation, warned that technology leaders could spark broader selling pressure. He noted that with Big Tech leading the rally since late 2022, the sector risks becoming a catalyst for a wider market pullback.
Other chipmakers also came under pressure. Nvidia fell 2.8%, contributing to a 4.8% drop in the broader semiconductor index, a day after Oracle issued a weak outlook.
Oracle shares slid 5.6% following reports that data centers built to support OpenAI’s ChatGPT have been delayed until 2028, a year later than previously expected.
Stocks that surged earlier this year on AI optimism also reversed sharply. SanDisk plunged 13.6%, while infrastructure-focused firms CoreWeave and Oklo each dropped 11%.
Major indexes close sharply lower
By 11:49 a.m. ET, the Dow Jones Industrial Average fell 295.81 points, or 0.61%, to 48,408.20. The S&P 500 declined 1.29%, losing 88.71 points to 6,812.29, while the Nasdaq Composite slid 1.91% to 23,142.43.
Nine of the eleven S&P 500 sectors finished lower, led by heavyweight technology stocks, which dropped 2.9%.
Friday’s losses erased weekly gains for both the S&P 500 and the Nasdaq. In contrast, the Dow Jones and the Russell 2000 managed to hold onto gains accumulated after the Fed cut rates and delivered a less hawkish outlook earlier in the week.
Despite this, futures markets continue to price in 50 basis points of interest rate cuts by the end of 2026, exceeding what the Fed projected on Wednesday.
Rotation away from mega-cap stocks continues
Recent outperformance in blue-chip and small-cap stocks has signaled a shift away from mega-cap technology names. The Russell 2000 has outpaced the S&P 500 for much of the quarter, alongside value-oriented sectors such as healthcare.
However, higher Treasury yields pressured small-cap stocks on Friday, sending the Russell 2000 down 1.4%.
Among individual movers, Lululemon Athletica surged 10% after raising its full-year profit forecast and announcing the departure of CEO Calvin McDonald.
Meanwhile, U.S.-listed cannabis stocks jumped after reports said President Donald Trump was considering easing marijuana restrictions through an executive order. Canopy Growth and Tilray Brands each rallied about 30%.
Market breadth was negative, with declining stocks outnumbering advancers by a 2.16-to-1 ratio on the NYSE and 2.11-to-1 on the Nasdaq.
The S&P 500 recorded 31 new 52-week highs and three new lows, while the Nasdaq Composite posted 106 new highs and 69 new lows.
