Nasdaq leads Wall Street lower as tech stocks lose ground

S&P 500, Nasdaq eye second straight weekly gain; financial, energy among top S&P 500 weekly sectoral gainers

The Nasdaq and the S&P 500 fell on Friday as a rally in technology stocks lost steam, while the Dow held steady, with financial shares rising on growing bets of bigger interest rate hikes by the Federal Reserve.

Megacap stocks Apple Inc, Tesla, Microsoft Corp and Nvidia Corp slipped between 0.5% and 1.9% after leading a Wall Street rebound this week. The S&P 500 technology sector fell 1%, while semiconductor stocks lost 1.2%.

Wells Fargo rose 2%, while the broader financial index gained 1.2%, as the U.S. 10-year Treasury yield hit 2.4%.

Economists at Citibank are expecting four 50 basis points interest rate hikes from the Fed this year, joining other Wall Street banks in forecasting an aggressive tightening path against the backdrop of soaring inflation.

The U.S. central bank last week raised interest rates for the first time since 2018.

"It's a reflection of the new reality that investors are facing in that we're going to have to come to terms with higher rates and in a much more accelerated fashion," said Mike Loewengart, managing director, investment strategy, E*TRADE from Morgan Stanley.

"There's now this resetting of (growth) expectations because of prolonged inflation, geopolitical turmoil and change in policy as a result."

A rebound in oil prices after reports of fire at Saudi Aramco's oil facility had pushed the three major indexes to session lows earlier.

"We don't know how much production this is going to affect moving forward and higher oil prices have been a headwind to the market. So anytime you see energy turn higher, it's not a great thing for the market," said Thomas Hayes, chairman at Great Hill Capital in New York.

Energy shares rose, with oil majors Chevron Corp and Exxon Mobil up 1.6% each.

U.S. stocks have rallied in six of the last eight sessions as gains in megacap stocks and strong economic data overshadowed worries about escalating geopolitical tensions, higher oil prices and calls for aggressive action by the Fed to combat surging inflation.

Meanwhile, Moscow signalled on Friday it was scaling back its ambitions in Ukraine to focus on territory claimed by Russian-backed separatists as Ukrainian forces went on the offensive, recapturing towns on the outskirts of the capital Kyiv.

At 12:30 p.m. ET, the Dow Jones Industrial Average was up 15.70 points, or 0.05%, at 34,723.64, the S&P 500 was down 2.39 points, or 0.05%, at 4,517.77, and the Nasdaq Composite was down 111.92 points, or 0.79%, at 14,079.92.

The benchmark S&P 500 and the tech-heavy Nasdaq indexes are on track for their second straight weekly gains.

Still, highlighting the defensive nature of the market, the S&P 500 utilities index, which is considered a bond-proxy, hit a record high.

The CBOE volatility index, also known as Wall Street's fear gauge, edged higher after closing at its lowest level since Feb. 10.

Declining issues outnumbered advancers for a 1.13-to-1 ratio on the NYSE and a 1.66-to-1 ratio on the Nasdaq.

The S&P index recorded 49 new 52-week highs and five new lows, while the Nasdaq recorded 61 new highs and 68 new lows.