Tech Sector Declines Drag Down US Stocks; Dow Holds Steady

US stocks closed lower on the final trading day of the week, largely influenced by a significant selloff in the technology sector. While the Dow Jones Industrial Average managed to maintain a weekly gain, the S&P 500 and Nasdaq Composite experienced declines due to heightened profit-taking and concerns over valuation in prominent AI stocks.

Market Overview

At the end of trading on Friday, the Dow Jones Industrial Average stood at 48,458.05, down 245.96 points or 0.51%. In contrast, the S&P 500 closed at 6,827.41, declining by 73.59 points or 1.07%, while the Nasdaq Composite dropped to 23,195.17, down 398.69 points or 1.69%.

Despite the downturn on Friday, the week showed a mixed performance across the indices. The Dow recorded a weekly gain of 1.05%, while the S&P 500 fell by 0.63%, and the Nasdaq declined 1.62%.

Sector Performance and Investor Sentiment

Investor sentiment shifted significantly, with a noticeable defensive rotation. Funds moved away from high-growth technology stocks and into safer sectors such as consumer staples and healthcare. The Consumer Staples sector led the market with a gain of 0.93%, followed by Health Care at 0.30%. Other sectors showing resilience included Materials and both Financials and Consumer Discretionary, each up by 0.11%.

In stark contrast, the technology sector faced significant challenges. The Information Technology sector was the major laggard, declining by 2.87%. The Energy sector also suffered, down 0.92%, influenced by falling oil prices, while Communication Services and Industrials fell by 0.69% and 0.64%, respectively.

The downturn in tech stocks was largely attributed to earnings reactions that suggested investors are becoming more selective regarding valuations and margins. A number of high-profile technology companies reported disappointing earnings, which set off a wave of profit-taking.

Key Stock Movements

Among the biggest losers in the technology sector was Broadcom, which saw its shares plummet 11.44%. Despite exceeding earnings and revenue expectations, the stock was heavily affected by what analysts termed “margin anxiety.” After a remarkable 58% rally this year, investors had high expectations, and management’s guidance on future margins failed to meet them, leading to a sharp selloff.

Ciena Corp also faced a significant decline, dropping 9.87%. The company had reported strong fourth-quarter results and raised its fiscal 2026 outlook, yet the stock suffered as investors took profits amid concerns over valuation levels.

Another notable fall was seen in Oracle, which decreased 4.80% for the day and 12.69% over the week. Investors expressed apprehension about the company’s substantial capital expenditure plans aimed at expanding AI data centers, raising worries that spending might outpace immediate profits.

Micron also faced challenges, down 6.71%, caught in the broader semiconductor selloff as traders began to de-risk their AI chip portfolios.

While the technology sector struggled, some individual stocks in other areas thrived. Lululemon Athletica emerged as a standout, surging 9.63% after reporting better-than-expected third-quarter earnings, alongside a $1 billion stock buyback announcement. The news sparked investor confidence in the company’s future direction.

Chipotle Mexican Grill also saw robust interest, gaining 3.64%, in line with strength in the Consumer Discretionary sector. Meanwhile, Tesla managed to buck the tech trend, rising 2.70%, as its shares found support even amidst the broader market’s struggles.

This market summary reflects a complex landscape where investor sentiment is shifting in response to earnings results and the performance of high-growth sectors. As the situation develops, market participants will continue to monitor these trends closely.