Stocks fell on Friday as Wall Street wrapped up a volatile week of trading, with tech shares struggling and U.S.-China tensions rising.
The Dow Jones Industrial Average slid 133 points, or 0.5%. The S&P 500 was also down 0.5% and the Nasdaq Composite dipped 0.7%.
Those losses put the Dow down 0.6% for the week and on pace to snap a three-week winning streak. The S&P 500 traded 0.2% lower week-to-date, putting it on track for its first weekly decline in four weeks. The Nasdaq, meanwhile, has lost 1% this week for its first back-to-back weekly losses since May.
Shares of Facebook, Alphabet, Apple and Microsoft all traded lower. Intel shares plunged more than 17% after the chipmaker offered disappointing guidance for the third quarter and delayed the release of its next-generation chips. Tesla dropped more than 5%. Amazon and Netflix bucked the negative trend, rising 0.8% and 1.3%, respectively.
Big Tech has been the market leader this year as investors grapple with the coronavirus pandemic and its impact on corporate profits. Amazon and Netflix are both up more than 49% year to date. Alphabet and Facebook are up over 13% over that time.
“Concerns of another technology bubble are rising,” said Keith Lerner, chief market strategist at Truist/SunTrust Advisory, in a note. “There is also growing concentration risk, with the top five stocks now accounting for 22% of the S&P 500 Index.”
To be sure, Lerner noted that “conditions today are largely not comparable to the mania seen during the technology bubble of the late 90s.”
“Absolute valuations are elevated but are less than half of the levels reached back then. The rising influence of a small group of stocks is a risk for the overall market, though these same companies are also contributing an increasing amount of cash flow and profits,” he said.
This week’s volatile trading action comes amid rising tensions between China and the U.S. China ordered the closure of a U.S. consulate in Chengdu, retaliating after Washington shut the Chinese consulate in Houston earlier this week. China markets plunged in response, with the Shanghai Composite dropping 3.9% overnight.
Investors also fretted this week about the state of the economy during the coronavirus pandemic.
The Labor Department said Thursday that 1.4 million Americans filed for unemployment benefits for the week ending July 18, topping a Dow Jones estimate of 1.3 million claims.
This is “no doubt sobering and a clear reminder that the pandemic is far from finished exacting its toll on our economy,” said Mike Loewengart, managing director of investment strategy at E-Trade. “While we’re hanging on to hopes of a stimulus bill, Americans are feeling the pain of stalled reopenings and renewed shutdowns across the country.”
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