A risk-off week on Wall Street is drawing to a close, with some of the most-expensive areas of the market driving stocks lower while a renewed slide in crypto leaves the asset class barely up for 2025.
Equities fell on Friday, with the S&P 500 set to halt a streak of three weeks of gains as a gauge of US consumer sentiment sank to a more than three-year low. Things were even worse for the Nasdaq 100 as a rout in artificial-intelligence winners put the tech-heavy measure on track for its worst week since the April tariff-fueled tantrum – when the index entered a bear market.
Worries about valuations in AI high-flyers reaching unsustainable levels surfaced after a torrid surge from this year’s bottom spurred calls for a breather. Technical indicators started flagging reasons for caution, adding to the drag on sentiment from warnings by Wall Street chief executives about a frothy market.
“Major indices are facing selling pressure this week,” said Craig Johnson at Piper Sandler. “Investors should prioritize good risk/reward setups, potentially after a healthy pullback within this bull market.”
This week’s slide also comes at a time when earnings season is winding down, with investors becoming reliant on private data amid a dearth of economic figures due to the ongoing government shutdown. That’s left the market vulnerable to volatility as it happened in the previous session with a report painting a bleak jobs picture.
While the US payrolls report was not released this Friday due to the shutdown, a survey conducted by 22V Research showed that a labor-market unwind is the biggest risk to trading. That explains why risk assets and bond yields have been unusually sensitive to any news data on that front.
The S&P 500 fell to around 6,670. The Nasdaq 100 slid 1.1%. A gauge of the Magnificent Seven megacaps sank 1.8%.
Bitcoin extended this week’s slide to 9%. The yield on 10-year Treasuries was little changed at 4.09%. The dollar lost 0.2%.
“While there is no jobs report Friday due to the government shutdown, there is enough private payroll and layoff data to suggest that the labor market is cooling,” said Glen Smith at GDS Wealth Management. “This cooling keeps the Fed’s rate cut plans alive for December and potentially into early 2026.”
The economy remains on an upward trajectory even if economic growth slows toward trend levels in 2026, according to Seema Shah at Principal Asset Management.
“The bigger concern — and the key focus of the Fed’s debate —will be the health of the labor market,” she said. “We anticipate the Fed will continue to implement rate cuts to prevent any weakness in employment from accelerating. Much of the market’s optimism hinges on the assumption that policymakers will maintain some level of support.”
Despite the slide, flows remain supportive. US equity funds had an eighth consecutive week of inflows, the longest streak this year, but cash attracted the bulk of inflows, Bank of America Corp. said citing citing EPFR Global data.
Traders are pondering a moment of weakness embedded in a multi-month rip higher for stocks, yet the market on balance looks poised for further gains, said Goldman Sachs Group Inc.’s Tony Pasquariello.
“I’m not saying that risk/reward is overly compelling, nor that this is an ideal location to add a bunch of incremental risk,” the head of hedge fund coverage at Goldman Sachs wrote in a note to clients Wednesday. “Looking forward, I’d argue the balance of risks still points in favor of the bulls.”
