The Nasdaq Composite moved lower Friday, pressured by more losses in artificial intelligence stocks, and was on pace for a losing week as new economic data added to investors' fears of a slowdown.
The tech-heavy index shed 0.3%. In contrast, the S&P 500 traded around the flatline, as did the Dow Jones Industrial Average. At their lows of the day, the Nasdaq had pulled back 2.1%, while the broad market S&P 500 and blue-chip Dow had fallen 1.3% and more than 400 points, or roughly 0.9%, respectively.
Stocks came off their lows after Senate Minority Leader Chuck Schumer, D-N.Y., offered up a new plan to Republicans that would enable the record-breaking U.S. government shutdown to end. The proposal would provide short-term funding for federal government operations in exchange for a one-year extension of enhanced Affordable Care Act tax credits.
In the midst of the stoppage, concerns among investors around the strength of the U.S. economy have grown. A survey from the University of Michigan revealed Friday that consumer sentiment has neared its lowest level ever. The data comes just a day after firm Challenger, Gray & Christmas reported that layoff announcements in October reached their highest level for the month in 22 years.
Investors have been getting little on the economic data front because of the ongoing shutdown. The Bureau of Labor Statistics would have released the nonfarm payrolls report Friday. For the second month in a row, however, it is unable to do so. Economists surveyed by Dow Jones had been expecting the report to show a decline of 60,000 jobs and an increase in the unemployment rate to 4.5%.
The Senate is expected to vote Friday on advancing a House-passed stopgap funding measure. The longest-ever federal funding lapse has posed a threat to economic activity, including causing flight disruptions due to shortages of air traffic controllers, who have been working without pay since October.
Transportation Secretary Sean Duffy said Wednesday that he will be cutting flights by 10% at 40 major airports starting Friday, a move that could affect 3,500 to 4,000 flights daily. As of Friday morning, more than 700 U.S. flights had already been canceled.
"No one likes the dark, and we've been in the dark for a while as far as government data is concerned, but I think we might further have some behavior being impacted," Leah Bennett, chief investment strategist at Concurrent Asset Management, told CNBC. "I think that speaks volumes to why valuations should, at least in the short term, continue to erode."
The three benchmark indexes are each on track to close in the red this week, as fears about elevated tech sector valuations and a highly concentrated market persist. The Nasdaq is down more than 3% week to date, pacing for its worst performance in a five-day period since the week ended April 4, when the index dropped 10%. The S&P 500 and the Dow have each lost more than 1% on the week.
Leading artificial intelligence player Oracle fell 2% and was on track for a 9% decline this week. Advanced Micro Devices, down 9% on the week, and Broadcom, off by 6% this week, were lower as well.
Key AI leaders lost steam on Thursday, with Nvidia, AMD, Tesla and Microsoft posting significant declines that weighed on the broader market. Major U.S. stock averages closed lower across the board, with the tech-heavy Nasdaq Composite notably dropping 1.9% and the 30-stock Dow closing lower by almost 400 points.
"You have had a bit of a rotation, which has been helpful in the value stocks, which kind of leads me to believe that the sell-off isn't overly concerning with the ['Magnificent Seven']," Bennett said, adding that "AI spending is still here."
"This AI rally that we've had I think does resume," she continued. "It's hard to call the top, but I don't think we're at the end of it."
