Stocks Halt Record-Breaking Rally as Tech Gets Hit: Markets Wrap

This content was published on November 27, 2024 - 22:05

7 minutes

(Bloomberg) — A selloff in giant technology companies dragged down stocks, while the latest economic data gave support to the Federal Reserve’s cautious stance on rate cuts.

Equities halted a seven-day rally that drove the S&P 500 to all-time highs. A Bloomberg gauge of the “Magnificent Seven” megacaps slid about 1%. Dell Technologies Inc. and HP Inc. tumbled at least 11% after their results disappointed investors. The US Federal Trade Commission has opened an antitrust investigation of Microsoft Corp., drilling into everything from the company’s cloud computing and software licensing businesses to cybersecurity offerings and artificial intelligence products.

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“It’s beginning to look a lot like ‘tech mess’,” said Jonathan Krinsky at BTIG. “The relative breakdown in tech is a concern heading into 2025, although the good news so far is rotation into other parts of the market keeps the broadening trade alive.”

In a thin trading session ahead of the Thanksgiving holiday, data showed the Fed’s preferred measure of underlying inflation picked up. While in-line with estimates, the core personal consumption expenditures climbed 2.8% from October last year. Separate figures showed the economy expanded at a solid pace.

The data support recent comments by many Fed officials that there’s no rush to cut rates as long as the labor market remains healthy and the US continues to power ahead. To Bret Kenwell at eToro, overall inflation has been moving in the desired direction, but a lack of further follow-through could force investors to reassess bets on future rate cuts.

“The last mile towards price stability has been stymied by still ‘sticky’ inflation and bumps along road,” said Quincy Krosby at LPL Financial.

The S&P 500 dropped 0.4%. The Nasdaq 100 slid 0.9%. The Dow Jones Industrial Average fell 0.3%.

Treasury 10-year yields declined six basis points to 4.25%. The Bloomberg Dollar Spot Index slipped 0.7%. Bitcoin rallied.

JPMorgan Chase & Co.’s equity strategy team, led for years by Marko Kolanovic until his departure earlier in 2024, has turned positive on US stocks.

Dubravko Lakos-Bujas, who took over market research for the firm this summer, released a year-end 2025 target of 6,500, which eclipses the average projection of about 6,300 among strategists tracked by Bloomberg.

“Heightened geopolitical uncertainty and the evolving policy agenda are introducing unusual complexity to the outlook, but opportunities are likely to outweigh risks,” he wrote.

US stocks have extended their outperformance against international peers this year, powered by tech shares and the artificial intelligence frenzy, while the economy remains resilient.

The S&P 500 has climbed over 25% in 2024, making numerous record highs and largely outpacing the MSCI World Ex-USA Index. The valuation gap has also widened, with US stocks now trading at a record 60% premium to international peers based on forward price-to-earnings ratios.

While the stock market is taking a breather after the S&P 500 notched its 52nd record of the year, seasonal trends suggest the momentum could continue.

Since 1950, the gauge has generated an average gain of 1.8% from Thanksgiving through year-end and finished higher about 70% of the time over this period, according to Adam Turnquist at LPL Financial. This compares to the broader market’s average gain of 1% and positivity rate of 63% during all six-week periods since 1950.

When the index is higher on the year into the holiday, the average gain into year-end bumps up to 2.1%, with 75% of occurrences yielding positive results, he noted.

Inflows into US equities surged after the election and a retail frenzy is back, while selling of Europe continues unabated, according to Barclays Plc’s Emmanuel Cau.

The strategist still sees some dry powder as despite big US inflows from long-only funds and retail, there was limited re-grossing by hedge funds and systematic strategies. He says sentiment indicators haven’t rebounded with the overall market, suggesting bullishness is not as widespread as it seems.

Corporate Highlights:

Autodesk Inc. Chief Executive Officer Andrew Anagnost said the company is focused on cutting costs in its sales and marketing teams, a move that comes following pressure from activist investor Starboard Value LP.
The US Federal Trade Commission is looking into whether Uber Technologies Inc. violated consumer protection laws with its flagship subscription service.
Urban Outfitters Inc. reported stronger-than-expected sales growth in the third quarter, led by its Anthropologie brand.
Nordstrom Inc. raised the lower end of its annual sales guidance after its off-price and flagship chains reported quarterly growth that was better than expected — results that could encourage the company’s board to push the founding family for a better offer to take Nordstrom private.
BlackRock Inc., Vanguard Group Inc. and State Street Corp. were sued by a group of states led by Texas for allegedly breaking antitrust law by boosting electricity prices through their investments, in the highest-profile lawsuit yet against the beleaguered ESG industry.
Symbotic Inc. cut its first-quarter revenue forecast and said it was unable to file its annual filing due to accounting errors.
Brookfield Asset Management Ltd. walked away from a plan to acquire Grifols SA, ending months of negotiations to take over the Spanish blood-plasma company.

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