Nasdaq Dips Amid Economic Uncertainty: Shutdown and Tech Valuation Weigh Heavily

The Nasdaq closed lower on Friday, concluding a week marked by fluctuating investor sentiment due to economic concerns.

The ongoing government shutdown—the longest in U.S. history—paired with high tech stock valuations, continued to weigh on the market.

However, hopeful signs of resolution in congressional negotiations helped mitigate losses late in the session.

All three major indexes recorded losses from last Friday's close. Significantly, the Nasdaq experienced its steepest weekly percentage decline since March, driven by concerns over high valuations of tech momentum stocks heavily invested in artificial intelligence.

'Ups and downs and periods of consolidation are part of the normal ebb and flow of a bull market,' said Terry Sandven, chief equity strategist at U.S. Bank Wealth Management.

The federal shutdown negatively influenced the University of Michigan's preliminary November Consumer Sentiment report, which registered its lowest level in over three years, indicating a pessimistic outlook from consumers.

The blackout of crucial economic data due to the shutdown complicates the Federal Reserve’s job of balancing employment and price stability. 'Investors face uncertainty flying in the dark,' said Ryan Detrick, chief market strategist at Carson Group.

Market analysts noted strong earnings among S&P 500 companies, yet highlighted weaknesses in the labor and housing markets.

On the trade front, China's new rare earth licensing plan may accelerate shipments, yet is expected to fall short of U.S. expectations for reduced restrictions.

Although S&P 500 gained modestly, the third-quarter reporting season showed strong earnings with 83% of companies outperforming expectations.

Tesla shareholders approved a historic pay package for Elon Musk, while the automaker’s shares declined. Block and Take-Two Interactive shares fell after reporting lower-than-expected profits and announcing a delay in a key video game launch, respectively.