Wall Street is facing growing doubts about the traditional year-end stock market rally after another brutal trading session left analysts predicting more pain ahead for investors.
Tech Stocks Stalling
The main concern centers on high-flying technology stocks that have powered a 34 per cent surge in the S&P 500 since hitting an April low. Their remarkable advance has now stalled, leaving the market dependent on sectors more vulnerable to signs of economic slowing and weakening consumer strength.
The S&P 500 fell 0.9 per cent on Monday, pushing its November decline to 2.5 per cent. The index has now gone 14 consecutive trading days without setting a new record—the longest such stretch since the 88 sessions between February and June, according to Bloomberg data.
The Magnificent Seven Struggle
The situation appears particularly dire for the so-called Magnificent Seven tech stocks, which have collectively dropped nearly 5 per cent this month. Among these market giants, only Alphabet Inc. remains in positive territory for November. This group has accounted for virtually all of the market's gains throughout the year.
The artificial intelligence trade that fueled much of this year's optimism has begun to wobble as investors worry about the massive borrowing required to fund its expansion. Adding to these concerns, Amazon.com Inc. tapped credit markets for US$15 billion in a bond sale just on Monday.
Economic Warning Signs
Multiple warning signs are flashing across the economy. The labor market shows indications of slowing, while low-end consumers appear increasingly strained. Technical indicators also suggest trouble ahead, with both the S&P 500 and Nasdaq 100 closing below their 50-day moving averages.
We're running out of time, said Adam Turnquist, chief technical strategist at LPL Financial. He noted that year-end rallies typically begin in early November, not after mid-month declines, and sees more pain ahead as key indexes breach critical chart levels.
John Roque, head of technical analysis at 22V Research, pointed to particularly concerning technical signals. The number of Nasdaq Composite components hitting 52-week lows now outnumbers those reaching new highs, a pattern he considers unsustainable for any market recovery.
Roque identified Meta Platforms Inc. as the bellwether for this correction, noting the Facebook owner began declining before its peers and may need to establish a bottom before the current market retreat concludes. Meta fell another 1.2 per cent on Monday and has now dropped 24 per cent from its August peak, largely due to investor concerns about its massive AI spending plans.
The coming week appears critical for any potential recovery toward all-time highs. Consumer giants including Walmart Inc., Home Depot Inc. and Target Corp. will report earnings and provide commentary on the crucial holiday shopping season. Nvidia Corp., the last of the big seven tech companies to report, will deliver its business update. Additionally, government economic data will begin flowing after a seven-week hiatus.
For some analysts, however, the S&P 500 may have already recorded its final high for the year, leaving investors facing an uncertain conclusion to what began as a promising period for stock markets.
