Tech Pullback and Rising Yields Create Market Headwinds Across Equities

U.S. stock indexes experienced significant selling pressure on Friday, driven by disappointing guidance from semiconductor leaders and increasingly hawkish Federal Reserve commentary. The S&P 500 Index declined 1.07%, while the Nasdaq 100 fell 1.91%, marking its lowest close in two weeks. The Dow Jones Industrial Average retreated 0.51% from recent all-time highs. December futures contracts mirrored the weakness, with E-mini S&P futures down 1.07% and E-mini Nasdaq futures declining 1.94%.

Semiconductor Sector Leads Retreat as Growth Concerns Emerge

The technology sector bore the brunt of Friday’s decline, with semiconductor stocks particularly hard hit. Broadcom (AVGO) plummeted over 11% after management failed to meet sales expectations and notably provided no AI revenue guidance for 2026—a significant signal to investors about near-term growth uncertainty in data center infrastructure spending.

The disappointment cascaded through the chip ecosystem. Micron Technology (MU) fell 6%, while Marvell Technology (MRVL) and Lam Research (LRCX) each declined more than 5%. Additional pressure appeared across Applied Materials (AMAT), Advanced Micro Devices (AMD), KLA Corp (KLAC), and Intel (INTC), all closing down 3-4%. Nvidia (NVDA), ASML Holding (ASML), GlobalFoundries (GFS), and ARM Holdings (ARM) similarly retreated more than 3%.

This week’s earnings disappointments from Oracle and Broadcom have prompted portfolio managers to reassess technology allocations amid elevated valuations and uncertainty over whether the massive capital expenditure on AI infrastructure will generate proportionate returns. However, this rotation into industrial and energy sectors has provided support to the Dow Jones, offsetting broader market weakness.

AI-Linked Infrastructure Stocks Face Collateral Damage

Beyond pure semiconductor plays, companies providing critical infrastructure for data centers experienced sharp declines. Vertiv Holdings (VRT) dropped 9%, reflecting concerns about slowing orders for power management systems. Amphenol (APH) and Constellation Energy (CEG) each fell 7%, while Eaton Corp (ETN) declined 5%. The weakness extended to GE Vernova (GEV), which lost 4%.

Bitcoin Weakness Pressures Crypto-Exposed Equities

Cryptocurrency-linked equities also faced headwinds as Bitcoin fell more than 3%. Galaxy Digital Holdings (GLXY) declined 10%, while Riot Platforms (RIOT) and MARA Holdings (MARA) each fell 2%. Coinbase Global (COIN) finished down 0.58%.

Fed Hawks Push Treasury Yields Higher

The 10-year Treasury note yield rose 3.5 basis points to 4.192%, pressured by divergent Fed commentary that emphasized inflation concerns. Chicago Federal Reserve President Austan Goolsbee, who voted against the most recent rate cut, stated: “Given that inflation has been above our target for 4.5 years, further progress on it has been stalled for several months…I felt the more prudent course would have been to wait for more information.”

Kansas City Fed President Jeff Schmid and Cleveland Fed President Beth Hammack both indicated dissent against the recent rate cut decision, preferring a “modestly restrictive” policy stance to continue pressuring inflation. On the dovish side, Philadelphia Fed President Anna Paulson expressed greater concern about labor market weakness than inflation risks.

Markets are now pricing only a 24% probability of a 25 basis point rate cut at the January 27-28 FOMC meeting. Meanwhile, the yield curve has steepened following the Fed’s announcement to purchase up to $40 billion in short-term Treasury bills monthly to enhance financial system liquidity.

International Markets Show Mixed Signals

Overseas indices presented a mixed picture. Europe’s Euro Stoxx 50 fell 0.58%, while China’s Shanghai Composite recovered from a 2.5-week low to close up 0.41%. Japan’s Nikkei Stock 225 rallied to a 4-week high, finishing up 1.37%. European government bond yields moved higher, with the 10-year German bund yield rising 1.4 basis points to 2.857% and the 10-year UK gilt yield climbing 3.3 basis points to 4.517%. European Central Bank swap markets are pricing zero probability of a rate cut at the December 18 policy meeting.

Corporate Earnings Provide Silver Lining

Despite Friday’s weakness, Q3 corporate earnings season concluded on a positive note. With 497 of 500 S&P 500 companies reporting results, 83% exceeded forecasts—positioning this quarter for the best performance since 2021. Third-quarter earnings rose 14.6%, more than doubling the expected 7.2% year-over-year growth rate, according to Bloomberg Intelligence data.

Individual Stock Highlights

Gainers: Lululemon Athletica (LULU) surged 9% after reporting Q3 EPS of $2.59 versus consensus of $2.22, and raising 2026 EPS guidance to $12.92-$13.02. Quanex Building Products (NX) climbed 9% following Q4 adjusted EPS of 83 cents, well above the 52-cent consensus. General Electric (GE) gained 3% on a Citigroup buy rating with a $386 price target. Linde Plc (LIN) advanced 3% after Citigroup named it a top pick with a $520 target. Bristol-Myers Squibb (BMY) added 2% following a Guggenheim upgrade to buy.

Decliners: Sandisk (SNDK) led losers, plunging 14% after GF Securities downgraded to hold. Netskope (NTSK) fell 11% on disappointing Q3 results and full-year loss guidance. Ciena Corp (CIEN) declined 9% following a Northland Securities downgrade. Roblox (RBLX) fell 6% after JPMorgan downgraded to neutral.