Stocks Drop Ahead of Megacap Earnings – US Market Wrap

Stocks fell at the end of a wild week, with technology giants’ earnings expected at a critical time on Wall Street.

The S&P 500 suffered its worst week since April, with technology leading losses on Friday. That follows a “rotation” in which investors reduced positions in this year’s winners in favour of small caps. Underpinning that trade were bets that the 2024 rally would broaden to include megacaps as the Federal Reserve cut interest rates. The swift repositioning sparked calls for a pullback, which engulfed various sectors, including technology, in the run-up to the industry’s earnings.

Following the selloff, the “Magnificent Seven” cohort of megacaps finished the week down 5%. Chipmakers have suffered more losses than other sectors of the technology industry. A closely watched index of semiconductors such as Nvidia and Intel fell nearly 9%. Even as investors cooled on the file rotation trade, small caps gained more than 1.5% during the period.

The S&P 500 fell to around 5,500 on Friday. The Nasdaq 100 fell approximately 1%. The Russell 2000 Index of smaller firms fell 0.6%. CrowdStrike Holdings, a cybersecurity company, was responsible for a massive IT failure that grounded flights, upended markets, and disrupted corporations worldwide. Its stock fell as much as 15% before paring losses.

Aside from a slew of earnings releases next week, traders will be looking at key economic reports, such as the Fed’s preferred price gauge, which is expected to keep bets on a September rate cut alive. Treasury yields edged higher across the curve on Friday.