The stock market faced a brutal sell-off on Friday, with major indexes tumbling as weak consumer sentiment, regulatory probes, and earnings jitters rattled investors. The Dow Jones Industrial Average led the decline, plummeting 750 points, or 1.7%, as blue-chip stocks like UnitedHealth and Nvidia dragged the index below its critical 50-day moving average. The broader market fared no better, with the S&P 500 and Nasdaq Composite also suffering significant losses, down 1.7% and 2.1%, respectively.
Dow Jones and Tech Stocks Bear the Brunt
The Dow’s sharp decline was fueled by a double whammy of bad news. UnitedHealth (UNH), a heavyweight in the index, tumbled more than 5% after reports surfaced that the Department of Justice is investigating its Medicare billing practices. The stock sank below both its 50-day and 200-day moving averages, signaling a bearish trend.
Meanwhile, Nvidia (NVDA), another Dow component, dropped over 3% as it tested its 50-day moving average. The chipmaker, a key player in the artificial intelligence (AI) boom, faces growing competition from China’s DeepSeek, which claims to achieve AI advancements at a fraction of Nvidia’s costs. However, Nvidia CEO Jensen Huang pushed back against these concerns in an interview with Barron’s, arguing that DeepSeek’s open-source model and intensive computing requirements could actually drive up demand for Nvidia’s products.
Economic Data and Buffett’s Annual Report Loom Large
The market’s downward spiral was exacerbated by disappointing economic data. The Purchasing Managers Index (PMI) fell to a 17-month low of 50.4, with the service-sector index missing estimates and dropping to 49.7, signaling contraction. Manufacturing PMI, while slightly better at 51.6, failed to lift spirits.
Adding to the uncertainty, investors are eagerly awaiting Warren Buffett’s annual shareholder letter, set to be released alongside Berkshire Hathaway’s (BRKB) annual report on Saturday. With Berkshire’s cash pile ballooning to 310billionattheendofthethirdquarter—upfrom310billionattheendofthethirdquarter—upfrom167 billion at the end of 2023—market watchers are keen to see how the Oracle of Omaha plans to deploy this massive war chest.
Small Caps and Growth Stocks Hit Hard
The small-cap Russell 2000 index wasn’t spared, plunging 3% and struggling to break through resistance at its 50-day moving average. Growth stocks, in particular, faced intense selling pressure. The Innovator IBD 50 ETF (FFTY), a benchmark for growth-oriented stocks, cratered 7%, marking its fourth consecutive decline.
Hims & Hers Health (HIMS), a top holding in the IBD 50, plummeted more than 20% after the FDA announced that the shortage of obesity drugs from Eli Lilly (LLY) and Novo Nordisk (NVO) had ended. This news sent shockwaves through the healthcare sector, with other stocks like Akamai Technologies (AKAM), GE Vernova (GEV), Constellation Energy (CEG), and Vistra (VST) also flashing sell signals. Akamai, for instance, plunged 15% after reporting declining earnings and slowing sales growth for the second straight quarter.
Earnings Season Sparks Volatility
Earnings reports added another layer of volatility to the market. MercadoLibre (MELI) and Booking Holdings (BKNG) were among the bright spots, with both companies beating estimates and breaking out of key chart patterns. MercadoLibre surged to an all-time high after reporting strong earnings and sales, while Booking Holdings posted a 30% increase in earnings per share.
On the flip side, Rivian (RIVN), a Tesla rival, saw its shares fall 3% despite beating sales estimates. The electric vehicle maker reported a narrower-than-expected loss but remains under pressure as its 50-day moving average continues to slope downward.
Regulatory News and Sector Rotation
In regulatory news, Coinbase (COIN) initially rallied after the Securities and Exchange Commission (SEC) announced it would drop a two-year lawsuit against the company. However, the stock gave up its gains and fell more than 5% as investors weighed the implications of the pending SEC vote.
Meanwhile, sector rotation was evident as investors fled growth stocks and sought safety in more defensive sectors. Financial giants like JPMorgan Chase (JPM) and Goldman Sachs (GS) fell below their 21-day moving averages, while tech leaders like Salesforce (CRM), Amazon (AMZN), and Microsoft (MSFT) also lagged.
What’s Next for the Market?
As the trading week comes to a close, the market’s trajectory remains uncertain. With economic data pointing to slowing growth, regulatory probes unsettling key sectors, and earnings season adding to the volatility, investors are bracing for more turbulence. All eyes are now on Warren Buffett’s annual letter, which could provide much-needed clarity—or further fuel the market’s unease.
For now, the message is clear: caution is the watchword as the market navigates a minefield of challenges. Whether this downturn is a temporary blip or the start of a deeper correction remains to be seen, but one thing is certain—Friday’s sell-off has left investors on edge.