S&P 500 and Nasdaq 100: Palantir and Microstrategy Slide on Year-End Profit-Taking

What’s Driving the Market at the Mid-Session

The S&P 500 and Nasdaq 100 are down sharply at the mid-session on Friday as tech stocks and growth sectors retreated in thin year-end trading. Profit-taking and tax-loss selling dominated, overshadowing an otherwise strong week driven by holiday optimism. Traders took gains off the table, particularly in high-flying technology names, contributing to broad market weakness.

Tech Titans Lead Declines as Tesla and Nvidia Sink

Technology and megacap stocks bore the brunt of Friday’s sell-off. Tesla slid 4.55%, erasing gains from earlier in the month, while Nvidia lost 2.89% as traders cashed in on its significant 2024 performance. Microsoft (-2.44%), Amazon (-2.19%), and Alphabet (-2.36%) each contributed to the Nasdaq 100’s 2.2% drop, with Apple slipping 1.82%.

Semiconductor stocks were hit hard, with Broadcom (-1.99%) and Advanced Micro Devices (-0.45%) giving back gains. Software leaders also struggled—Adobe fell 1.68%, while Salesforce dipped 1.22%. The losses were broad, reflecting tax-related rebalancing and low liquidity rather than negative company-specific news.

Institutional Rebalancing and Treasury Yields Pressure Equities

Market insiders noted potential institutional rebalancing as a key driver of the sell-off. Pension funds and asset managers appeared to shift allocations away from equities and toward bonds, with the 10-year Treasury yield climbing to 4.60%. This movement weighed on rate-sensitive tech stocks, reinforcing the downward momentum.

Adding to the pressure, Bank of America reported $35 billion in equity outflows this week, the largest since December 2022. This shift reversed the previous week’s record $62 billion inflow, reflecting caution as investors reposition portfolios ahead of the new year.

Thin Liquidity Amplifies Market Moves

The absence of institutional buyers in the final trading days of 2024 contributed to exaggerated market movements. Analysts cited low liquidity as a major factor, allowing modest selling to cascade across indexes. “Buy-the-dip” efforts were repeatedly rejected, suggesting that large investors are waiting for clearer signals in January before re-entering the market.

Retail traders and smaller investors dominated Friday’s activity, contributing to volatile intraday swings. Stocks like Palantir (-4.22%) and Microstrategy (-3.32%) experienced sharper drops, while Tesla’s pullback hinted at more sector-wide rebalancing.

Market Forecast: Is a Deeper Correction on the Horizon?

The near-term outlook tilts bearish as profit-taking and tax-loss selling may persist into the final trading days of 2024. Tech stocks, particularly semiconductors and software, face continued pressure if bond yields remain elevated. However, renewed liquidity and investor optimism in early January could reignite bullish sentiment.

A deeper correction is possible, especially in the Nasdaq 100, if heavyweight stocks like Nvidia and Microsoft continue to retreat. Traders should monitor Treasury yields and institutional activity closely as they may dictate broader market direction into the first quarter of 2025.

More Information in our Economic Calendar.