Nasdaq falls again as it heads for worst week since March, S&P 500 is flat

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Stocks fell on Friday, giving up an earlier gain as another recovery attempt by the tech sector failed. 

The S&P 500 slid 0.1% and the Nasdaq Composite was down 0.8%. The S&P 500 also hit its lowest level of the week on Friday.  The Dow Jones Industrial Average traded around 100 points higher, or 0.4%. The 30-stock average had rallied as much as 294 points earlier in the day, while also spending time in negative territory.

In early afternoon trading, the S&P 500 dropped below its 50-day moving average — a key level watched by traders — for the first time since April. The Nasdaq also dipped below its 50-day moving average and has not close below the mark since April 21.

“Markets continue to struggle finding an equilibrium,” said Mark Hackett, chief of investment research at Nationwide. “This market is more akin to the emotional swings of March and April than in recent months. We are likely to continue in a period of directionless volatility as bulls and bears wrestle between the strong Fed liquidity and improving economic backdrop and the continued uncertainty and elevated valuations.”

Apple dropped 2.7% and Amazon fell by 2.5%. Facebook, Alphabet and Microsoft were all down more than 1%. Netflix dipped 0.3% and Tesla was down 2.1%.

The selling pressure in those names picked up after Bloomberg News reported, citing sources, that SoftBank was considering changes to its options trading strategy. Last week, SoftBank was identified as the “Nasdaq whale” that bought billions in stock options in a bet for higher prices in Big Tech. 

Wall Street was coming off a session in which the major averages closed sharply lower after a steep downturn in tech names. The Dow and S&P 500 dropped more than 1% each on Thursday and the Nasdaq lost 2%. Those losses came after the benchmarks gave up solid gains. 

Douglas Busch, founder of ChartSmarter.com, said a “hallmark” of a healthy market is closing near its high after a weak start. “The opposite of that action could be the definition of how the benchmarks fared Thursday,” he said.

“Decent early gains quickly faded, and as many stated last week’s lows were critical to hold,” Busch said in a note to clients. “Perhaps, for the first time in a while, we can say advantage bears.”

The market is on track to post big losses for the holiday-shortened week. The Dow is down 2.6% this week while the S&P 500 has fallen 2.9%, set for its second straight weekly loss for the first time since May. The tech-heavy Nasdaq has dropped 4.2%, and is headed for its worst week since March.

“The next couple of sessions will be crucial in judging the possible extent of the pullback, and bulls will be looking for signs of positive divergences as the major indices approach their 50-day moving averages,” said Ken Berman, strategist at Gorilla Trades.

Consumer prices jump in August

The Labor Department said Friday its U.S. consumer price index rose by 0.4% in August. Eonomists polled by Reuters expected an increase of 0.3%.

That larger-than-expected advance was driven the biggest cost increase for used cars and trucks in more than 51 years. 

“The resurgence in economic demand following the pandemic lock down has turned the direction of consumer prices on its head with pent-up purchases from the consumer dramatically changing the deflation trend to an inflation trend,” said Chris Rupkey, chief financial economist at MUFG. 

— CNBC’s Yun Li contributed reporting.

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