The S&P 500 experienced a marginal decline for the week, primarily attributed to losses incurred by tech giants Apple and Nvidia. Apple's shares dipped by 6% during the week following China's directive for central-government officials to discontinue the use of iPhones. Nvidia, a pivotal player in the field of graphics chips and artificial intelligence, saw its stock decline by 6.1% for the week, notwithstanding a remarkable year-to-date gain of over 200%.
These two tech giants wield considerable influence over the broader U.S. stock index. According to Howard Silverblatt, Senior Index Analyst at S&P Dow Jones Indices, at the close of August, Apple and Nvidia collectively accounted for nearly 30% of the S&P 500's total return for 2023, inclusive of dividends.
The S&P 500 experienced a 1.3% drop for the week, while the tech-focused Nasdaq Composite registered a 1.9% decline. In contrast, the Dow Jones Industrial Average, which includes Apple but not Nvidia, exhibited a more modest decline of 0.7%.
Investors are expressing apprehensions regarding the tech-driven rally that has propelled the market throughout the year. The technology sector, in particular, retreated by 2.3% during the week, trimming its year-to-date gains to 41%. Dan Genter, Chief Executive and Chief Investment Officer at Genter Capital Management, remarked, "We are finally witnessing a more discerning evaluation of artificial intelligence." While companies like Microsoft and Nvidia stand to gain from advancements in AI in the short term, Genter cautioned that "many other companies may not experience a substantial earnings benefit."
The technology sector currently trades at 25.6 times its projected earnings for the next 12 months, a notable increase from the 20 times reported at the beginning of the year and surpassing the 10-year average of 18.5, as per FactSet data. Many investors perceive this valuation as elevated, potentially curbing future gains.
Stephanie Lang, Chief Investment Officer at wealth-management firm Homrich Berg, stated, "The technology sector is under heightened scrutiny due to its valuations."
In addition to tech, shares of financial, healthcare, and industrial companies also experienced declines in weekly trading. Notably, energy and utilities were the sole sectors among the S&P 500's 11 sectors to register gains for the week.
Major indexes recorded gains on Friday, ending a three-day losing streak for the S&P 500 and a four-session decline for the Nasdaq Composite. The S&P 500 posted a modest 0.1% increase, while the Nasdaq rose by the same margin. The Dow Jones Industrial Average gained 0.2%, equivalent to approximately 76 points.
Among individual stocks, Kroger witnessed a 3.1% increase in its shares on Friday following a settlement to address opioid-related claims against the supermarket chain. The company exceeded earnings expectations but fell short of sales forecasts.
Block's shares declined by 5.3%, accumulating an 8.8% loss for the week, in response to outages experienced by payments platform Square on Thursday and Friday.
Investors are eagerly anticipating the forthcoming release of the consumer-price index data on Wednesday, which could provide insights into the Federal Reserve's future actions in its efforts to combat inflation. The central bank's rate-setting committee is scheduled to convene the following week.
This week's data has raised concerns that the economy might be overheating, potentially leading the Fed to continue raising interest rates. The Institute for Supply Management reported that the services sector expanded for the eighth consecutive month in August, and the Labor Department revealed that initial jobless claims, a gauge of layoffs, reached their lowest point since early February.
Yields on U.S. government bonds saw a slight increase over the week. The yield on the benchmark 10-year Treasury note rose from 4.173% to 4.257%, though it inched lower from Thursday's 4.260%.
Oil prices experienced an uptick, with Brent crude, the global benchmark, advancing by 2.4% to $90.65 per barrel for the week. This boost contributed to a 1.4% rise in energy stocks. Exxon Mobil shares increased by 1.8% in weekly trading, while Valero Energy's shares surged by 6.3%.
Overseas, the Stoxx Europe 600 posted a 0.2% gain on Friday but concluded the week with an 0.8% decline. In Asia, the Shanghai Composite recorded a 0.2% dip, contributing to a 0.5% weekly decrease, while the Nikkei 225 saw a 1.2% decline for the day and a 0.3% drop in weekly trading.
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