The stock market retreated as the AI trade faced renewed pressure, with yesterday's broader market rotational strength notably slimmer in today's trade. The DJIA (-0.5%) notched a record intraday high early in the session before retreating, while the S&P 500 (-1.1%) and Nasdaq Composite (-1.7%) faced wider losses. 

A double-digit loss in Broadcom (AVGO 359.90, -46.48, -11.44%), despite an earnings beat and upside guidance for the next quarter, highlighted the concerns that many of the mega-cap tech names are priced for perfection, making them susceptible to outsized downswings in the absence of an aggressive growth outlook.

Oracle (ORCL 189.59, -9.26, -4.66%) faced a similar sentiment-based retreat yesterday, which largely spurred the broader pullback across tech names this week. 

The information technology sector (-2.9%) ceded its week-to-date gains with today's loss. Broadcom, NVIDIA (NVDA 175.08, -5.85, -3.23%), and other chipmakers contributed to a 5.1% slide in the PHLX Semiconductor Index. 

While six sectors finished lower, the technology sector was the only sector with a loss of 1.0% or wider.

The communication services (-0.7%) was a laggard as a result of weakness in its own mega-cap components, Alphabet (GOOG 310.56, -3.14, -1.00%) and Meta Platforms (META 644.27, -8.44, -1.29%). The Vanguard Mega Growth ETF closed with a 1.5% loss.

As a result, the market-weighted S&P 500 lagged the equal-weight index (-0.7%), with both finishing below their baselines, even as the DJIA briefly hit another record high before tech-led losses broadened out.

While not as strong as yesterday's action, several sectors still managed gains as the tech sell-off has spurred some rotational action into cyclical and defensive sectors. 

The consumer staples sector (+0.9%) was the top advancer by a relatively wide margin. Walmart (WMT 116.65, +1.13, +0.98%) notched a record high, while Costco (COST 884.49, +0.01, +0.00%) finished flat after beating top-and-bottom line estimates. 

lululemon athletica (LULU 205.08, +18.08, +9.67%) was the top gainer in the S&P 500 today after a solid earnings report of its own. Notably, the company's CEO will step down effective January 31. 

Lulu's rally helped the consumer discretionary sector (+0.1%) scratch out a slight gain, while the health care (+0.3%), materials (+0.2%), and financials (+0.1%) sectors also finished modestly higher. 

Outside of the S&P 500, the smaller-cap Russell 2000 (-1.5%) and S&P Mid Cap 400 (-1.3%) finally ran into some resistance after outperforming this week, reflecting the overall weaker sentiment in today's trade. 

On the policy front, Chicago Fed President Austan Goolsbee and Kansas City Fed President Jeffrey Schmid offered insight into their decision to dissent from the FOMC's decision to deliver a 25-basis point rate cut at Wednesday's meeting in favor of keeping the Fed funds rate unchanged. Mr. Schmid cited inflationary risks, while Mr. Goolsbee stated he did not want to frontload too many cuts but has a dovish outlook for 2026, though neither will be a voting member next year. 

Looking ahead, investors will focus on Tuesday's jobs report and Thursday's CPI release, with both key readings likely to influence Fed expectations amid the market's rotational disposition.

U.S. Treasuries ended the week with losses in most tenors while the 2-year note resisted the pressure, locking in a modest gain for the week. The 2-year note yield finished unchanged at 3.53% (-3 basis points this week) and the 10-year note yield settled up five basis points to 4.19% (+5 basis points this week).

• Nasdaq Composite: +20.1% YTD
• S&P 500: +16.1% YTD
• Russell 2000: +14.4% YTD
• DJIA: +13.9% YTD
• S&P Mid Cap 400: +7.4% YTD