Stock Market Today: Stocks Close Lower as Tech Shares Slump
Weakness in several Magnificent 7 stocks created headwinds for the main indexes Friday.
Stocks opened lower Friday and stayed there through the close as several Magnificent 7 stocks sold off. A triple-witching event in the options market likely added to the volatility, with all three main indexes ending the week with a thud.
At the close, the tech-heavy Nasdaq Composite was down 1.0% at 15,973, while the broader S&P 500 was off 0.7% at 5,117 and the blue-chip Dow Jones Industrial Average was 0.5% lower at 38,714.
Friday marked the first triple-witching expiration of 2024. This quarterly event, which is when index futures, index options and stock options all expire at once, can lead to heavy volume and erratic moves in parts or all of the market. Today, options tied to more than $5 trillion in stocks, exchange-traded funds (ETFs) and indexes expired.
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But the main driver of today's price action was weakness in the technology (-1.5%) and communication services (-1.0%) sectors. The downside came as several Magnificent 7 stocks declined, including Microsoft (MSFT, -2.1%), Alphabet (GOOGL, -1.3%) and Meta Platforms (META, -1.6%).
Analyst upgrades Snowflake from Sell
Elsewhere, Snowflake (SNOW) fell 1.2% even after Guggenheim Securities analyst John DiFucci upgraded the stock to Neutral (Hold) from Sell. While DiFucci says the cloud-based data platform faces a "mountain of challenges," its near-term setup is "attractive" and guidance for the current fiscal year is achievable.
SNOW's share price is down more than 30% since late February when the company gave weak first-quarter revenue guidance and announced the departure of CEO Frank Slootman.
The stock also happens to be a member of the Berkshire Hathaway equity portfolio, with Warren Buffett & Co. first reporting a stake in Q3 2020 as part of SNOW's initial public offering (IPO).
Adobe sinks after earnings
Adobe (ADBE) was another weak performer Friday, with the Photoshop parent spiraling 13.7% after earnings. Although the company reported higher-than-expected earnings and revenue for its fiscal first quarter and announced a new $25 billion stock buyback program, it gave weak second-quarter sales guidance.
Still, CFRA Research analyst Angelo Zino kept a Buy rating on Adobe stock. Despite the disappointing guidance, there is a strong potential for annual recurring revenue (ARR) to accelerate the rest of this fiscal year as "ADBE looks to monetize new AI offerings," Zino says, adding that Adobe "will also benefit from its large installed base, partnerships, and vast capabilities from ideation/editing/processing/publishing."
Fed meeting on deck
Looking ahead to next week, the Fed meeting could spark volatility in stocks. No change to the federal funds rate is expected this time around but the Fed's Summary of Economic Projections (SEP), or "dot plot," which summarizes what each member expects monetary policy to be going forward, could signal where the central bank expects it to be by year's end.
"Hotter-than-expected inflation data to start the year argue for a hawkish-leaning message from the Fed at the March FOMC meeting," says a team of economists at Deutsche Bank. "That said, in a very close call, we do not yet expect this to manifest in the Fed signaling less easing this year."
While the economists do anticipate a mild upward revision to the Fed's inflation forecasts for this year, "we expect the median dot to stay at three cuts for 2024."
According to CME Group's FedWatch Tool, futures traders are currently pricing in a 51% chance the first quarter-point rate cut will come in June.
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