The Dow Jones Industrial Average reached a new all-time high on an intraday basis early in Friday's trading session but shortly succumbed to selling pressure on tickers with ties to the AI revolution. It's all quiet on the economic calendar, but the earnings calendar continues to provide fresh fuel for the AI boom vs AI bust debate.
Markets were almost entirely focused on stocks and sectors on Friday, with no incoming data, official or otherwise, reported. Semiconductor superstar Nvidia (NVDA, -3.3%) and AI hyperscalers Amazon.com (AMZN, -1.8%) and Microsoft (MSFT, -1.0%) were major culprits among Dow Jones stocks.
Walmart (WMT, +1.0%) took the lead atop the index on behalf of consumer staples stocks. UnitedHealth Group (UNH, +1.5%), which represents health care stocks with great weight in the index because of its high price, pulled higher as well. So did Boeing (BA, +1.8%), even as industrial stocks as a group were down for the day.
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Marijuana stocks caught a spark on word from Washington, D.C. that President Donald Trump is considering an executive order to move cannabis to Schedule III from Schedule I and to treat it like other common prescription painkillers.
By the closing bell, the Dow Jones Industrial Average was down 0.5% to 48,458, but the blue-chip index was higher by 1.0% for the week. The S&P 500 declined by 1.1% to 6,827 and led to a weekly loss of 0.6%. The Nasdaq Composite slid 1.7% on Friday and closed down 1.6% for the five days at 23,195.
AVGO is the story (for today)
The discussion around whether we're in an AI boom or an AI bubble will remain well beyond Thursday's fourth-quarter earnings announcement from Broadcom (AVGO, -11.4%). But for today, AVGO was the story.
The world's second-biggest semiconductor stock reported earnings of $1.95 per share (+37.3% year over year) on revenue of $18.02 billion (+28.2% YoY), topping Wall Street estimates on both lines.
CEO Hock Tan said Broadcom expects AI semiconductor revenue to double in the first quarter, and management also raised AVGO's quarterly dividend by 10.2% from 59 cents to 65 cents per share.
Nevertheless, investors, traders and speculators expressed their growing skepticism about the scale of AI spending and the potential for AI profitability, at least anytime soon.
AVGO was down as much as 11.7% "despite delivering solid beats top and bottom yesterday," explains Louis Navellier of Navellier & Associates, "as they warned on AI margins, bringing further concerns about deals being made with OpenAI."
Navellier notes similarities to Oracle (ORCL, -4.6%); ORCL stock was down 10.8% on Thursday after its post-closing-bell report on Wednesday.
"In the trailing month," Navellier observes, "the Nasdaq is essentially flat, the Magnificent 7 up less than 0.3%, and while Nvidia is down 6%, semiconductors are still up 2.2%. The AI bubble is deflating but not popping."
After the December Fed meeting
With the White House apparently locked on its candidate, Matt Peterson of Barron's talked to people who have worked with National Economic Council Director Kevin Hassett about how he would function as the next Fed chair.
"Their worry," Peterson writes, "wasn't that Hassett would propose problematic economic policies, but that his allegiance to a president who seeks to influence a Fed so directly could compromise his independence as chair."
The yield on the 2-year U.S. Treasury note ticked down to 3.526% from 3.530% on Thursday, but the 10-year yield was at 4.188% vs 4.141%, and the 30-year yield climbed to 4.852% from 4.790%.
Indeed, interest rates are rising even after what Navellier describes as a "somewhat dovish" rate cut following the December Fed meeting.
"Part of this is the growing conclusion that a January Fed cut is unlikely," he notes, adding that CME FedWatch shows a 77.9% probability the target range for the federal funds rate remains 3.50% to 3.75% after the first FOMC meeting of 2026, "consistent with the Fed's wait-and-see stance."
At the same time, higher interest rates at the long end of the curve "will restrain P/E multiples, put pressure on the higher leveraged small cap companies, and hit real estate directly."
Profit-taking while the major stock market indexes are at or near all-time highs is not unusual, Navellier says. "The higher move in interest rates is troubling," he cautions, "and along with heightened concerns on OpenAI agreements may make further gains challenging."
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