Key TakeawaysTech stocks had a volatile week, selling off sharply on Thursday and regaining ground on Friday, while some of the market\u2019s more recent laggards rallied.It\u2019s unlikely that a single piece of news sparked the fluctuations, though investor concerns are mounting about the pace corporate borrowing to finance the AI buildout.Despite a week of noisy headlines, US stocks remain up 15% for the year.<\/p>\n
Stocks whipsawed this week, with the biggest swings coming from the red-hot tech sector. The Morningstar US Technology Index<\/a> soared more than 2.5% on Monday, but that momentum was short-lived. Tech stocks plunged 2.43% on Thursday but recovered some ground Friday, ending the week up 0.20%.<\/p>\n The Morningstar US Market Index<\/a> closed on Friday with a weekly loss of 0.09%, offset by gains in the healthcare and energy sectors, as jitters in tech weighed heavily on the broader market. It was real-time evidence of the concentration risk<\/a> that\u2019s been on Wall Street\u2019s mind for the past two years.<\/p>\n \u201cWhen tech faces headwinds, it has an outsized impact on the market indices we all follow,\u201d says Dominic Pappalardo, chief multi-asset strategist for Morningstar Wealth. \u201cIt\u2019s the phenomenon we\u2019ve been warning people about.\u201d<\/p>\n At the same time, some of the market\u2019s recent laggards saw outsize gains as tech struggled. Healthcare stocks climbed 3.60% for the week, while energy stocks rose 2.53%.<\/p>\n Consumer cyclicals saw the worst returns with losses of 2.60%. Even after days of volatility, tech stocks ended the week roughly flat.<\/p>\n What Caused the Market Selloff?<\/p>\n As has been the case for much of the past few months, no single piece of news appeared to drive the market\u2019s action this week. \u201cLooking at any week in isolation is challenging,\u201d Pappalardo says. That\u2019s especially true given that stocks hit an all-time high<\/a> at the end of October.<\/p>\n Unfolding in the background was the longest government shutdown in history. Its end looked likely when markets opened on Monday morning and became official by Thursday morning. Also top of mind for Wall Street was a significant repricing<\/a> of the odds of a December interest rate cut from the Federal Reserve, which dropped from a near certainty just a few weeks ago to roughly 50% amid increasingly hawkish comments from Fed officials and the disruption of government jobs and inflation data.<\/p>\n On its own, Pappalardo says one month of missing data is unlikely to alter the picture very much. But \u201cif [data disruptions] become a reason for the Fed not to cut in December, then [they] could compound into something that does impact markets.\u201d<\/p>\n It\u2019s also possible that the normal process of rebalancing among major funds and institutional stockholders contributed to the movement in the market this week, according to Pappalardo. \u201cMost funds and managers don\u2019t necessarily want to wait until the very end of the year\u201d to adjust their asset allocations.<\/p>\n Tech Stocks Lead Declines<\/p>\n Overall, the noisiest headlines this week came from the tech sector, amid worries that the artificial intelligence companies which have led the market rally for months will not be able to deliver on investors\u2019 lofty expectations for profits and share price growth.<\/p>\n