Wall St mixed as energy, defensive sectors counter megacap declines

By Amruta Khandekar and Saeed Azhar

(Reuters) – Wall Street’s main indexes were mixed and close to unchanged on Friday as weakness in megacap growth stocks offset gains in defensive sectors and energy, while investors looked toward next week’s speech by Federal Reserve Chair Jerome Powell.

Megacap technology-related growth stocks dipped, with Alphabet (NASDAQ:) down 2.1% and Tesla (NASDAQ:) off 1.8%, as investors fretted that interest rates could stay higher for longer.

With no major catalysts driving markets, focus has shifted to Powell’s speech at the Jackson Hole economic symposium next Friday for clues on the interest rate outlook as well as earnings from chip designer Nvidia (NASDAQ:) on Wednesday.

Nvidia’s shares fell 0.4% but were still up over 5% on the week. Nvidia has seen a spectacular rally on expected growth in artificial intelligence, nearly tripling in value year to date.

The communication services index fell 1.2%, the deepest decline among 11 sector indexes.

Defensive plays such as consumer staples and utilities kept losses in check, with gains in firms such as retailer Walmart (NYSE:) helping keep the afloat.

The S&P 500 energy index rose 0.7%, with Exxon Mobil (NYSE:) climbing 1.3%.

Among major movers of the day, Estee Lauder (NYSE:) dropped 2.6% after the cosmetics maker forecast its annual net sales and profit below Street estimates.

The S&P 500 was down 0.09% at 4,366.49 points.

The Nasdaq declined 0.24% to 13,285.04 points, while the Dow was up 0.01% at 34,477.17 points.

The three main U.S. stock indexes are on track for sharp weekly losses after a spate of strong economic data caused investors to dial back expectations of rate cuts and drove up government bond yields.

“We’ve long been overdue for a correction in equities, and it’s clear that higher rates have now become the catalyst for that,” said Michael Reynolds, vice president investment strategy

at investment and wealth advisory firm Glenmede.

“When the opportunity cost for capital becomes more competitive, valuations should correct on risk bearing assets, especially large cap equities which have been trading at significant premiums this year.”

Benchmark 10-year U.S. Treasury yields dropped from 10-month highs after they approached – but failed to break through – levels that would have been the highest since 2007 on Thursday. [US/]

Traders see a nearly 91% chance of the Fed holding rates at current levels at its September meeting, according to the CME Group’s (NASDAQ:) FedWatch tool.

The tech-heavy Nasdaq is set to post the biggest weekly declines of the three major indices, down nearly 3% so far.

The CBOE volatility index hit its highest in nearly three months, reflecting rising investor anxiety.

Hawaiian Electric shares jumped 13% after the utility firm said its goal was not to restructure the company.

Shares of cryptocurrency firm Coinbase (NASDAQ:) Global fell 2.3% and Riot Platform fell almost 5% as bitcoin hit a fresh two-month low.

Advancing issues outnumbered declining ones on the NYSE by a 1.25-to-1 ratio; on Nasdaq, a 1.29-to-1 ratio favored advancers.

The S&P 500 posted no new 52-week highs and 17 new lows; the recorded 18 new highs and 211 new lows.