Weakness in technology shares dragged the S&P 500 and Nasdaq a little lower on Friday.
Nvidia shares, which fell more than 3 per cent, was the biggest drag on both indexes and took the tech sector with it.
Despite the decline, the chipmaker remains up about 155 per cent on the year as a rally in AI-related stocks has lifted both indexes to record highs in recent days.
Nvidia lost more than $220 billion in value in two days. Apple also fell.
The Dow Jones Industrial Average rose 0.04 per cent, the S&P 500 lost 0.16 per cent and the Nasdaq Composite lost 0.18 per cent.
The Dow ended the week up 1.44 per cent, its biggest weekly percentage gain since mid-May.
The S&P rose 0.61 per cent for its third weekly advance in a row. The Nasdaq rose only 0.003 per cent on the week, its third straight weekly advance.
US Treasury 10-year yields were little changed at 4.25 per cent.
“Some believe that yesterday’s sell-off was motivated by soft data – that came in too soft to cheer up investors. To me, yesterday’s reluctance to flock into the US stocks had more to do with investors’ psychology,” said Ipek Ozkardeskaya, senior analyst, Swissquote Bank.
“Nasdaq 100 flirted with the 19,980 level this week. We are very, very close to the 20,000 super-psychological level, and investors may be – but just may be – thinking that the tech rally – which is the only reason we see the major US indices renew record after record – is now overstretched, and that the valuations have gone well ahead of themselves and that it could be time to take a pause, and maybe put some of the profits in pocket.”
Wall Street's bumper gains since the final leg of 2023 have been primarily driven by the likes of Nvidia and a handful of other heavily weighted stocks linked to artificial intelligence.
Analysts, however, have raised concerns whether the strong increase in their valuations is sustainable.
Nvidia’s market value jumped to more than $3.4 trillion on Tuesday, exceeding those of other US technology giants Microsoft and Apple.
The company’s market value has more than tripled over the past year as enthusiasm for AI increases.
The dollar hit its highest level since early May as US business activity reached a 26-month high in June amid a rebound in employment, while easing price pressures suggested the recent inflation slowdown may continue.
Flash services PMI increased to 55.1 this month, while manufacturing PMI edged up to 51.7. A reading above 50 indicates expansion.
“The sell-off in major currencies like the franc and the pound helped lifting appetite in the US dollar,” Ms Ozkardeskaya said.
“The EUR-USD returned to 1.07 and rebounded from that level. We will be unlikely to see the same sell-off we did before last weekend as the French political risks are better understood and better digested by now.”
Friday also recorded triple witching, the simultaneous expiration of stock options, stock index options, and stock index futures. Volume soared at the close of trading.
It was estimated that $5.5 trillion expired during the quarterly event. Nearly 18 billion shares changed hands on US exchanges on Friday. That is more than 55 per cent above the three-month average.
Friday’s options event came at a critical juncture for markets positioning for the second half of 2024 and the Federal Reserve’s next course of action.
With input from Reuters and Bloomberg
