U.S. stocks finished lower on Friday as investors continued to reduce exposure to large-cap technology shares and rotate toward more cyclical and value-oriented sectors.
The S&P 500 fell 1.07% to close at 6,827.41, while the Nasdaq Composite dropped 1.69% to 23,195.17, extending the recent pullback in growth stocks.
The Dow Jones Industrial Average declined by 245.96 points, or 0.51%, to end at 48,458.05. Earlier in the session, the index briefly touched a new intraday record.
Small-cap stocks also came under pressure, with the Russell 2000 sliding 1.51% to 2,551.46, despite reaching a fresh all-time high during the day.
Rotation away from tech gathers momentum
Friday’s moves reflected the continuation of a rotation trade that has accelerated in recent sessions. After strong gains earlier this year driven by artificial intelligence enthusiasm, investors have increasingly taken profits in tech and shifted capital toward sectors more closely tied to economic growth.
The shift followed the Federal Reserve’s third interest-rate cut of the year, announced on Wednesday.
For the week, the S&P 500 slipped 0.6% and the Nasdaq fell 1.6%. The Dow outperformed, rising 1.1%.
Small-cap stocks also led on a relative basis, with the Russell 2000 gaining 1.2% for the week after posting new all-time and closing highs on Thursday.
Markets look ahead to data and Fed leadership signals
U.S. equity futures edged higher early Monday, suggesting a firmer open following last week’s tech-led selloff. Investors are bracing for a heavy calendar of economic data that could influence expectations for interest rates.
Attention has also turned to leadership at the Federal Reserve. According to a Wall Street Journal report, U.S. President Donald Trump said he has narrowed his shortlist for the next Fed chair to former Governor Kevin Warsh and National Economic Council Director Kevin Hassett.
The possibility of a more dovish Fed chair has reinforced expectations for interest-rate cuts next year, even as inflation remains above the central bank’s 2% target and other developed economies face renewed price pressures.
On the data front, markets will focus on nonfarm payrolls reports due Tuesday. The release will cover both November and October, after October’s data was delayed by a government shutdown.
Additional data releases later in the week, including business activity surveys, weekly jobless claims, and inflation readings, are expected to offer further insight into economic momentum and the Fed’s policy path.
“This week’s jobs data may matter more for equity perceptions of interest-rate policy than last week’s FOMC meeting,” said Morgan Stanley strategist Michael Wilson.
“With equity returns becoming more negatively correlated with interest rates, we are firmly back in a ‘bad is good’ environment. Moderate labor market weakness is likely to be viewed positively by equities,” he added.
Investors will also monitor speeches from several Federal Reserve officials, along with a handful of earnings reports, including results from Micron, Nike, and Accenture.
What strategists are saying about U.S. stocks
Raymond James: The firm said markets are rotating into cyclical stocks as breadth improves. Solid earnings trends, lower interest rates, and expected fiscal support in early 2026 are seen as supportive. The key question is whether tech will continue to fund the rotation into cyclicals or if rising Treasury yields will push capital back into growth stocks.
Morgan Stanley: The bank noted that the Fed delivered a slightly less hawkish rate cut than expected and surprised markets by restarting asset purchases. While this is seen as supportive, weak liquidity signals could raise near-term risks if conditions persist.
Evercore ISI: Evercore expects the bull market to extend into 2026, supported by the AI revolution, steady economic growth, and ongoing fiscal and monetary stimulus. The firm said traditional signals that typically end bull markets remain absent and projects the S&P 500 reaching 7,750 by the end of 2026.
