(June 27): US stocks ended the week lower as ongoing weakness in chip stocks outweighed a survey showing cooler-than-expected inflation expectations and easing rate hike concerns.
The S&P 500 fell 0.1% Friday to cap off its biggest weekly decline since the beginning of June and closed below its 50-day moving average for the first time since April. Chipmakers were the worst performers in the benchmark, including a sharp drop by ON Semiconductor after an all-stock deal to buy Synaptics spurred a downgrade at TD Securities.
The tech-heavy Nasdaq 100 Index fell 1.1% to bring its weekly decline to 4%. The Dow Jones Industrial Average slipped 0.1% Friday.
In a choppy trading session, the S&P 500 briefly flipped green but the gains were fleeting, similar to the “plenty of failed rally attempts” investors saw this week, said Steve Sosnick, chief strategist at Interactive Brokers.
The market pared declines after a University of Michigan survey showed respondents see inflation at 3.3% in the five- to 10-year time frame, lower than previous expectations of 3.4%. The survey also showed consumer sentiment rising, though it remains near a record low.
In the end, concerns about artificial intelligence (AI) valuations that started in Asia weighed on US trading. Two of China’s best-known hedge funds said AI stocks are in a bubble that may be ready to pop. OpenAI backer SoftBank Group Corp tumbled in Japan after a New York Times report the ChatGPT owner may delay its initial public offering until 2027. South Korea’s highly concentrated Kospi Index was hit by a second trading halt this week as chipmakers plunged, before recovering some losses.
See also: Stocks whipsaw as Micron surges while Apple sink
In the US, investors have pulled money from US equities for the first time in three months, shedding US$8.5 billion ($11 billion), according to Bank of America data.
“There is a really big question as to whether or not this equity market will have the patience with these hyperscalers to wait for the returns to come,” Cameron Dawson, chief investment officer at Newedge Wealth, said in a Bloomberg TV interview.
“We would not be buying big tech stocks or AI stocks at current levels, as their dominance is starting to erode, as the Mag 7 and bitcoin peaked 9 months ago and have not recovered. The market is telling us something and investors ought to listen,” said Richard Reyle, chief investment officer, Questar Capital Partners.
See also: US stocks climb even as Apple price hikes offset chipmaker strength
Crude oil extended its slide as tanker traffic continues to flow through the Strait of Hormuz despite a shocking attack on a ship.
“With the peak in energy prices now behind us, headline inflation has the room it needs to fall. That is not to say price pressures have vanished entirely,” said Brian Jacobsen, chief economic strategist at Annex Wealth Management.
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