Tech pullback drags Wall Street stocks lower

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US technology stocks fell on Friday as investors moved away from companies that had made the stock market record highs this year.

The S&P 500, Wall Street’s main equity index, was down 1.2 percent in Friday afternoon trading, while the tech-heavy Nasdaq Composite was down 1.7 percent. Elon Musk’s electric car maker Tesla was one of the biggest laggards, down 4.8 percent, while chip maker Nvidia down more than two percent.

Asset technology has been very strong this year, as investors are betting artificial intelligence it would drive demand for everything from servers to microchips. Success increased after Donald Trump’s election victory in November on bets that the president-elect will introduce good trade policies when his term begins next month.

However, the sector has been more buoyant in recent weeks as investors reassess their business performance at the end of the year. The Federal Reserve also sparked controversy last week when it predicted just two quarterly rate cuts next year, compared to its September forecast of four, while officials worried about the growing risks of inflation being set above the central bank’s target of 2%.

Hawkish ratings have pushed up long-term borrowing costs in the US, and the 10-year Treasury yield rose to 4.61 percent on Friday, compared with a low in September of 3.6 percent. High yields often undermine the appeal of owning shares in fast-growing companies.

Citigroup analysts on Friday said that while they predict the S&P 500 will rise 10 percent from current levels by the end of next year, they expect “an unstable leg of the bull market who is coming”.

The Bank of America noted that this year’s rise in stock prices compared to corporate profits was “setting the tone for fundamentals next year, and even the year after”. The S&P 500 is trading at about 22.2 times expected earnings next year, compared with the past decade’s average of 18.1, according to FactSet data.

The S&P 500 is up about 25 percent year-to-date and after Friday’s pullback, roughly matching last year’s gains.

The so-called Magnificent 7 Big Tech stocks — Apple, Microsoft, Meta, Amazon, Alphabet, Nvidia and Tesla — account for nearly half of the total S&P 500, including dividends this year, said Howard Silverblatt on the S&P Dow Jones. Indices.

All Magnificent 7 shares fell on Friday, however, with Apple, Microsoft, Amazon and Meta down at least 1 percent each.

Business activity is often lighter than usual during the holidays, which can exacerbate uncertainty.