S&P 500 retreats from record, Nasdaq falls more than 1% as rotation out of tech continues, led by Broadcom

U.S. equities pulled back on Friday as investors continued to exit technology stocks and move into value areas of the market.

The S&P 500 fell 0.9%, and the Nasdaq Composite declined 1.4%. The Dow Jones Industrial Average was last trading down 157 points, or 0.3%, after scoring a new intraday all-time high earlier in the session.

The broad market index and tech-heavy Nasdaq were bogged down by a 10% drop in Broadcom, which some analysts think is because of margin compression worries. That’s even after the company beat fourth-quarter expectations and gave a strong forecast for the current quarter, saying artificial intelligence chip sales look to double.

As the AI trade faced more pressure, with names like AMD, Palantir Technologies and Micron seeing some losses alongside Broadcom, stocks in other areas of the market such as financials, health care and industrials received a bit of a boost. In those sectors, Visa and Mastercard as well as UnitedHealth Group and GE Aerospace were winners.

Lululemon was also a winner during the session. Shares jumped 10% after the athletic apparel retailer announced that its CEO will step down at the end of January, following poor performance for the company over the past year.

“Today is a value-outperforms-growth day,” said Jed Ellerbroek, portfolio manager at Argent Capital Management. “Investors are definitely skittish as it relates to AI — not outright pessimistic, but just kind of, I think, cautious and nervous and hesitant.”

Friday’s action marked another day of the rotation trade, as investors on Thursday poured into cyclical stocks that are considered more sensitive to the economy while taking profits in growth-oriented names tied to the AI trade. The move comes after the Federal Reserve on Wednesday cut interest rates for the third time this year.