U.S. stocks traded lower on Friday, as optimism from the Federal Reserve’s recent rate cut was outweighed by renewed concerns over high valuations in the technology sector, particularly tied to artificial intelligence.
By 11:03 a.m. ET, the Dow Jones Industrial Average fell 192 points, or 0.4%. The S&P 500 declined 1.2%, shedding 84 points, while the Nasdaq Composite slid 1.8%, down 429 points.
Dovish Fed supports sentiment, tech stocks lag
The Federal Reserve lowered interest rates by 25 basis points on Wednesday, in line with expectations. During the post-meeting press conference, Chair Jerome Powell adopted a noticeably less hawkish tone than markets had feared.
Powell also announced that the Fed will begin purchasing $40 billion in Treasury bills per month, effective immediately. The move is expected to inject additional liquidity into financial markets, easing monetary conditions and supporting risk-sensitive assets.
Investors continue to price in at least 50 basis points of further rate cuts next year, driven by expectations that President Donald Trump’s nominee for Fed chair will lean dovish. White House economic adviser Kevin Hassett is widely viewed as the leading candidate.
Research firm BCA Research said it expects 2026 to be broadly supportive for equities but warned that upside for the S&P 500 may be limited. The firm cited extended valuations despite favorable macro factors such as monetary easing, fiscal support, AI-related capital spending, and strong earnings growth.
BCA forecasts the S&P 500 to finish next year between 7,200 and 7,500, implying potential returns of just 5% to 10%.
Goldman Sachs also remains constructive on U.S. equities heading into 2026, emphasizing that earnings growth will continue to be driven by the largest companies in the index. The firm noted that the so-called “Magnificent Seven” stocks — including Nvidia, Apple, Microsoft, Alphabet, Amazon, Broadcom, and Meta — generate roughly 25% of total S&P 500 earnings.
Broadcom and tech stocks under pressure
Despite the supportive policy backdrop, the technology sector remained under strain following a cautious outlook from cloud computing giant Oracle, which reignited fears of overstretched AI-related valuations.
Broadcom shares also fell sharply after the chipmaker warned that its high-margin non-AI business is expected to post weak performance in the current quarter. The company further indicated that a major data center agreement with OpenAI is unlikely to contribute meaningful revenue until at least 2027.
Although Broadcom exceeded expectations for fiscal fourth-quarter earnings and guided for above-consensus revenue in the current quarter, investors remained cautious. The company also disclosed an AI order backlog of $73 billion over the next 18 months.
Concerns persist over Broadcom’s reliance on OpenAI, as well as the possibility that some of its largest customers may choose to develop AI data center chips internally, an option the company acknowledged is being considered by at least two clients.
Mixed moves across other sectors
Outside of technology, Costco reported better-than-expected first-quarter revenue, supported by resilient consumer demand across income levels despite growing economic uncertainty.
Shares of Lululemon Athletica surged after the company announced the departure of CEO Calvin McDonald and raised its full-year profit forecast.
Oil prices retreat after early gains
Oil prices edged lower on Friday, reversing earlier gains that had been driven by concerns the U.S. could intercept additional Venezuelan oil shipments, tightening supply.
Brent crude fell 0.2% to $61.14 a barrel, while WTI crude declined 0.1% to $57.52 a barrel.
Both benchmarks were headed for weekly losses, after sliding around 1.5% on Thursday, as prospects of a Russia–Ukraine peace agreement raised expectations of increased Russian oil supply entering global markets.
