Economic Indicators Signal Mixed Outlook as U.S. Markets React to AI Stock Declines

More drops for superstar artificial-intelligence stocks knocked Wall Street off its record heights on Friday, with the S&P 500 falling 1.1% from its all-time high, marking its worst day in three weeks.

The Nasdaq composite led the decline, down by 1.7%, while the Dow Jones Industrial Average decreased by 245 points, or 0.5%, after setting its own record the day before. Broadcom significantly dragged the market lower, plummeting 11.4%, despite reporting a stronger profit for the latest quarter than analysts expected, driven by a 74% growth in AI semiconductor revenue.

Analysts described Broadcom's performance as solid, but concerns arose regarding its financial forecasts and the sustainability of its profit margins. Oracle also faced a sharp decline, plunging nearly 11% after reporting a bigger profit than anticipated, raising doubts about the profitability of its AI technology investments.

The AI industry is under scrutiny, even as substantial investments continue to flow in. The drop in AI stocks coincided with an increase in the yield on the 10-year Treasury, which climbed from 4.14% to 4.18%, potentially discouraging investors from paying high stock prices.

In contrast, stocks in the Dow, which have less exposure to tech, rose 1% over the past week, showing resilience amidst the tech sector's struggles. Meanwhile, consumer-dependent stocks performed relatively well, with companies like Chipotle Mexican Grill rising 3.6%, McDonald's climbing 2.3%, and Norwegian Cruise Line adding 1.5%.

Lululemon Athletica saw the largest gain in the S&P 500, jumping 9.6% after exceeding profit and revenue expectations. Overall, the S&P 500 fell by 73.59 points to 6,827.41, the Dow Jones dropped by 245.96 to 48,458.05, and the Nasdaq composite slumped by 398.69 to 23,195.17.

In international markets, Europe experienced modest declines after a stronger finish in Asia, where stocks in Hong Kong rose by 1.7% and Tokyo by 1.4%.