The S&P 500 and Nasdaq indices closed marginally lower on Friday, weighed down by a decline in Nvidia shares for a second consecutive day. The technology sector was the biggest loser, down 0.84%, while communication services led the gain. The Dow Jones Industrial Average rose 0.04%, while the S&P 500 lost 0.16% and the Nasdaq Composite lost 0.18%.
Nvidia’s decline was attributed to a surge in call options trading, with over 7 million contracts traded, according to Michael Green, chief strategist at Simplify Asset Management. This high trading volume is unusual and may indicate a concentration of activity in Nvidia shares.
Despite the decline, megacap stocks such as Microsoft, Alphabet, Amazon, and Apple rose between 0.92% to 1.89%.
The trading session was marked by volatility due to triple witching, the simultaneous expiration of stock options, stock index options, and stock index futures.
US business activity reached a 26-month high in June, according to flash services PMI data, while manufacturing PMI edged up. However, May home sales fell to a seasonally adjusted annual rate of 4.11 million units.
Analysts have raised concerns about the sustainability of the strong increase in valuations of AI-linked stocks like Nvidia. Money markets are still pricing in a 58% chance of a 25-basis point rate cut in September.
What they are saying:
– “It’s Nvidia’s game, and the rest of us are just pretending to be here.” – Michael Green, chief strategist at Simplify Asset Management
– “We’ve had a very strong run, especially in the S&P over the last couple weeks. So not surprised to see things kind of take a pause and settle down.” – Zachary Hill, head of portfolio management at Horizon Investments
Why it matters:
- – The decline in Nvidia shares highlights concerns about the sustainability of the strong increase in valuations of AI-linked stocks.
- – The volatility in the trading session due to triple witching may have contributed to the decline in the tech sector.
- – The strong business activity data suggests a rebound in employment and a possible continuation of the inflation slowdown.
In Essence:
The US stock market ended mixed on Friday, with the tech sector weighed down by a decline in Nvidia shares. Despite the decline, megacap stocks rose, and business activity data suggested a rebound in employment and a possible continuation of the inflation slowdown. The volatility in the trading session due to triple witching may have contributed to the decline in the tech sector
