S&P 500, Nasdaq slip ahead of PMI data By Reuters

By Lisa Pauline Mattackal and Ankika Biswas

(Reuters) -Wall Street was set for a muted open on Friday as chip stocks lost ground, with focus on data from the manufacturing and services sectors for more clues on the health of the world’s largest economy.

The crossed the 5,500 point milestone during Thursday’s session, however, both the benchmark index and the tech-heavy Nasdaq closed lower as megacap stocks pulled back.

AI chip firm Nvidia (NASDAQ:) dropped 1.7% in premarket trading on Friday, after losses in the previous session saw its market valuation fall back below that of Microsoft (NASDAQ:).

Semiconductor stocks Qualcomm (NASDAQ:), Micron Technology (NASDAQ:) and Arm Holdings (NASDAQ:) were down between 0.8% and 3.4%, while megacaps such as Microsoft and Apple (NASDAQ:) rose 0.1% and 0.3%, respectively.

Wall Street’s bumper gains since the final leg of 2023 have been primarily driven by the likes of Nvidia and a handful of other heavily weighted stocks linked to artificial intelligence. Analysts, however, have flagged whether the strong increase in their valuations is sustainable.

“The largest companies in the S&P 500 are excellent, very profitable and growing quickly … but they are getting a little bit expensive,” said Chris Zaccarelli, chief investment officer at Independent Advisor Alliance.

“We wouldn’t be surprised if the market takes a breather and cools off a bit in the short term.”

Investors are also assessing a string of weakening economic data and commentary from U.S. Federal Reserve officials that interest rates could remain higher for longer if there is no consistent improvement in inflation numbers.

Later in the day, focus will be on flash S&P PMI readings, that are expected to fall slightly, but remain above the 50 level that shows activity is still expanding. Existing housing sales data is on tap as well.

Friday’s session will also mark the expiry of quarterly derivatives contracts tied to stocks, index options and futures, also known as “triple witching”.

All three major Wall Street stock indexes are set to close the week higher, as is the small-cap focused .

Money markets are pricing in a 58% chance of a 25-basis point interest rate cut at the Fed’s meeting in September, and still expect about two rate cuts this year, according to LSEG’s FedWatch data.

At 8:45 a.m. ET, were down 47 points, or 0.12%, were down 4.5 points, or 0.08%, and were down 1.75 points, or 0.01%.

Spirit AeroSystems (NYSE:) jumped 4.5% following a Reuters report that Boeing (NYSE:) is nearing a deal to buy back the airplane parts supplier after months of talks.

Drugmaker Gilead (NASDAQ:) jumped 3.0%, extending gains from Thursday as a late-stage study showed its long-acting injectable drug was more effective in preventing HIV infection in women compared to its existing daily pill Truvada.

Sarepta Therapeutics (NASDAQ:) soared 33.2% after the U.S. Food and Drug Administration allowed the expanded use of the company’s gene therapy for patients with Duchenne muscular dystrophy aged four and older.