U.S. equity markets experienced a broad retreat during afternoon trading on Friday, November 7, 2025, as a persistent sell-off in technology stocks intensified, driven by mounting concerns over inflated valuations in the artificial intelligence (AI) sector and exacerbated by the ongoing government shutdown. All three major indexes were firmly in negative territory, signaling a challenging end to the trading week and putting them on track for their steepest weekly losses in months.
Major Index Performance
The tech-heavy Nasdaq Composite (IXIC) bore the brunt of the downturn, slumping approximately 1.5% to 2% in afternoon trading, positioning it for its worst weekly performance in seven months or since March. This follows a 1.9% decline on Thursday. The S&P 500 (SPX) also saw significant losses, falling between 0.9% and 1.2% by mid-afternoon. On Thursday, the S&P 500 had slid 1.1%. Meanwhile, the Dow Jones Industrial Average (DJI) was down around 0.5% to 0.8% in afternoon trading. It closed 0.8% lower on Thursday.
The widespread negative sentiment was underscored by an 8.3% surge in the CBOE Volatility Index (VIX), Wall Street's "fear gauge," which reached its highest level in over two weeks, reflecting increased investor nervousness and hedging activity ahead of key macro data. All three benchmark indexes are now set to record weekly losses, with the Nasdaq poised for its most significant weekly decline since March.
Sectoral Shifts and Afternoon Trading Activity
Afternoon trading activity continued to highlight a rotation out of high-growth technology stocks. The Technology Select Sector SPDR Fund (XLK) and the Consumer Discretionary Select Sector SPDR Fund (XLY) were among the hardest hit sectors, having slipped 2% and 2.3% respectively on Thursday. This trend persisted into Friday, as investors continued to book profits on AI infrastructure developers amidst concerns about "highly overstretched valuation" in the space.
Conversely, the Energy Select Sector SPDR Fund (XLE) managed to advance by 1% on Thursday, making it one of the few sectors to finish in positive territory. This divergence suggests a defensive shift in investor portfolios, favoring more traditional and value-oriented sectors over speculative growth.
Upcoming Market Events
The market's current unease is significantly amplified by a prolonged U.S. government shutdown, now in its 38th day. This shutdown has led to a "data blackout," delaying crucial economic releases such as the October jobs report (including Non-Farm Payrolls) and the Consumer Price Index (CPI). The absence of official data leaves investors "flying blind," relying instead on private sector reports.
One such private report, released yesterday, indicated a substantial weakening in the labor market, with over 150,000 layoffs announced in October – the highest total for that month in more than two decades. Today, the University of Michigan Consumer Sentiment Index for November is expected to provide further insights into consumer confidence. Looking ahead to next week, the market will closely watch for weekly ADP employment figures and the NFIB Small Business Optimism Index, as these private indicators become even more critical in the absence of government data. CPI and PPI data are tentatively scheduled for November 13, with Retail Sales on November 14.
Federal Reserve officials have recently pushed back against expectations of immediate rate cuts, citing ongoing inflation risks and the lack of comprehensive official economic data. On November 5, the Federal Reserve Board finalized changes to its supervisory rating framework for large bank holding companies, aiming to better align supervisory measures with actual risk. Additionally, the Open Market Trading Desk at the Federal Reserve Bank of New York announced that it will begin conducting its daily domestic repurchase agreement (repo) and reverse repo operations using the new FedTrade Plus auction platform starting November 14, 2025.
Major Stock News and Corporate Developments
Several prominent companies made headlines today:
- Tesla (TSLA) saw its shares fall 3.3% to 4% in afternoon trading, tracking the broader market's negative sentiment. This comes despite shareholders approving CEO Elon Musk’s proposed $1 trillion compensation package after the market closed on Thursday, which initially sent shares up 1.6% in after-hours trading.
- Chipmakers continued to face significant pressure. Nvidia (NVDA) dropped 3.8%, 2.8%, and 3.7% by afternoon, while Broadcom (AVGO) fell 4.6% and 2.2%. These declines reflect growing investor caution regarding the high valuations of AI-related stocks. Other tech giants like Microsoft (MSFT), Amazon (AMZN), Alphabet (GOOGL), Meta (META), Advanced Micro Devices (AMD), and Palantir Technologies (PLTR) were also trading lower. Apple (AAPL) was marginally lower.
- Payments company Block (SQ) (formerly Square) slumped 9.8% to 10.5% after reporting disappointing third-quarter earnings that fell short of Wall Street's forecasts.
- In contrast, some companies delivered positive surprises. Exercise equipment maker Peloton (PTON) jumped 3.4% to 6.1% following better-than-expected results. Similarly, Expedia Group (EXPE) surged 16.6% to 17.3% after beating analysts' quarterly earnings forecasts and raising its annual revenue growth outlook.
- Salesforce Inc. (CRM) was a notable loser among the Dow components, declining 5.3% on Thursday.
The market's current trajectory suggests that investors are grappling with a complex mix of factors, including elevated tech valuations, economic uncertainty stemming from the government shutdown, and a cautious stance from the Federal Reserve. This has led to a significant pullback, particularly in the tech sector, as the market recalibrates its expectations for future growth and profitability.
Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications.