Wall Street loses ground under the weight of falling technology stocks

Technology Stocks Drive Market Decline as Wall Street Faces Earnings and Shutdown Challenges

Wall Street retreated Thursday as influential technology stocks dragged the broader market lower, threatening to break a three-week winning streak for major indexes. The technology sector, which has dictated market direction throughout the week, pushed the S&P 500 down 75.97 points (1.1%) to 6,720.32, while the Dow Jones Industrial Average fell 398.70 points (0.8%) to 46,912.30, and the Nasdaq composite dropped 445.80 points (1.9%) to 23,053.99.

Market heavyweights bore the brunt of the decline, with Nvidia falling 3.7% and Microsoft dropping 2%. Amazon slumped 2.9%, exerting significant pressure on indexes due to these companies’ outsized influence on market direction.

Corporate earnings reports took center stage as investors sought clarity about economic conditions amid the ongoing government shutdown, which has halted the release of critical economic data. The shutdown—now the longest on record—has deprived markets of essential information on inflation, employment, and retail sales, forcing investors to rely more heavily on company reports and private economic indicators.

DoorDash shares plunged 17.5% after the food delivery platform warned investors about significantly higher product development spending next year. The dramatic selloff highlighted investor sensitivity to increased expenditures in the current economic climate.

CarMax delivered another notable disappointment, tumbling 24.3% after releasing underwhelming financial results and announcing CEO Bill Nash’s upcoming departure in December. The used car retailer’s struggles reflect broader concerns about consumer discretionary spending.

Not all earnings news was negative. Software company Datadog surged 23.1% after exceeding analyst expectations with its quarterly results. Rockwell Automation climbed 2.7% following a strong earnings report that easily beat forecasts.

The week’s volatility comes after major indexes reached record highs last week, raising concerns about potential overvaluation in the market. These worries are particularly focused on large technology companies that have led the market higher amid enthusiasm for artificial intelligence advancements.

“This earnings season is proving especially crucial as investors look for justification of the market’s record-setting run,” noted market analyst Rebecca Chen. “With major tech companies commanding such high valuations, their performance and outlook statements are being scrutinized for any signs of weakness.”

The government shutdown has significantly complicated the Federal Reserve’s decision-making process regarding interest rates. Without official data on employment and inflation, the central bank faces challenges in determining whether to continue cutting rates to support a potentially weakening job market, which could risk stoking inflation.

“We anticipate the Fed will continue to implement rate cuts to prevent any weakness in employment from accelerating,” said Seema Shah, chief global strategist at Principal Asset Management. “Much of the market’s optimism hinges on the assumption that policymakers will maintain some level of support.”

The Fed has already cut its benchmark interest rate twice this year and has signaled caution as it navigates economic risks. Market expectations for a December rate cut have declined to 71% from over 90% before the most recent cut, according to CME FedWatch.

Private economic data is filling some information gaps. ADP reported that private payrolls rose more than expected in October, while the Institute for Supply Management indicated expansion in the services sector. However, Challenger, Gray & Christmas reported that U.S. job cuts surged 175% in October compared to the previous year, citing softer consumer spending, rising costs, and AI adoption as key factors.

The shutdown is also directly impacting airlines, with the Federal Aviation Administration announcing a 10% reduction in air traffic starting Friday across 40 “high-volume” markets due to critical staffing problems. Major carriers felt the impact, with American Airlines falling 2%, Delta Air Lines dropping 1.2%, and United Airlines declining 1%.

In other market news, European stocks fell after a divided Bank of England maintained its main interest rate, while Asian markets closed higher. In the bond market, yields moved lower, with the 10-year Treasury yield falling to 4.09% from 4.16% and the two-year Treasury yield dropping to 3.56% from 3.63%.