U.S. stock market indices fluctuated last week. The lifting of tech stocks supported the Dow, while the S&P 500 and Nasdaq ended the week lower following a rotation out of technology stocks. The S&P 500 dropped by roughly 0.6%, while Nasdaq fell 1.6%. The Dow, however, grew by 1%, marking its third straight weekly gain.
Notable market movements included an 11.5% plunge in Broadcom’s shares. Despite a quarterly earnings beat, concerns about potentially over-inflated AI stock valuations exerted a downward pressure on the stock. Following Broadcom, Meta Platforms and Nvidia were the week’s worst performers.
Oracle also experienced an 11% fall upon revealing a quarterly sales shortfall, disappointing future guidance, and an elevated spending outlook. AI trade worries also affected Nvidia.
On the contrary, GE Vernova was last week’s top performer, closing at a record high based on positive guidance potentially stretching to fiscal 2028. Other weekly winners include the Honeywell spinoff Solstice Advanced Materials and Dover.
Investments are continuing to rotate out of tech and into value areas of the market, with tech stocks leading the market’s downturn. Despite a brutal week for tech stocks, materials and industrial stocks, along with financials, emerged as the market’s winners.
The Federal Reserve’s third interest rate cut this year is expected to spur economic optimism and drive broader bullishness for stocks. Lululemon shares shot up more than 9% after announcing the departure of its CEO at the end of January due to disappointing sales.
The stock market’s late-December “Santa Claus rally” may serve as a course-correction mechanism following these fluctuations.
The Dow Jones Industrial Average and S&P 500 hit new highs this week, with Dow closing up 1.34% at 48,704.01 and the S&P 500 settling up 0.21% at 6,901.00. However, the Nasdaq Composite dipped 0.26% to 23,593.86, impacted by disappointing quarterly results from cloud computing company Oracle that saw its share fall nearly 11%.
The drop in Oracle raised concerns about the return on investment for tech companies investing in artificial intelligence, leading to a rush out of AI stocks and into broader shares that might benefit more directly from a growing U.S. economy. Other tech stocks including Nvidia and Broadcom also fell by more than 1%.
On the other hand, Visa’s shares contributed to the Dow’s climb after an upgrade at Bank of America. Cyclical stocks like Home Depot also traded higher.
Investors are currently concerned about Oracle and the AI trade in general due to the significant financial commitments in the sector but unclear returns on investments. The current concern in the AI sector served to dampen the momentum gained during the prior session due to a Federal interest rate cut.
Data center infrastructure specialist Vertiv recorded a slumping stock value, falling roughly 15% week-to-date due to an analyst recommendation downgrade from Wolfe Research’s Nigel Coe. He considers that after a significant run-up in Vertiv share price, it is now fairly valued. This comes despite Vertiv’s recent acquisition of cooling technology specialist Purge Rite Intermediate for around $1 billion.
While the data center space is currently in-demand, especially with the steadily growing demands of AI technology, Vertiv was not included in the 10 best stocks recommended by The Motley Fool Stock Advisor analyst team.
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