US stocks retreated on Monday as the S&P 500 pulled back from its record highs reached during last week’s “Santa Claus Rally,” with technology and AI-linked names, including Nvidia, Tesla, and Palantir, leading the decline.
The benchmark index fell roughly 0.4% in midday trading, while the Nasdaq Composite slipped 0.7% as investors locked in profits following a year of outsized gains.
Despite the retreat, markets remain in a strong year-end posture, with the S&P 500 up nearly 18% for the year and trading volume thin due to the holiday-shortened week.
Market snapshot: Profit-taking hits Big Tech
The S&P 500 traded around 6,900, down approximately 0.4% from Friday’s close of 6,929.94, while the Nasdaq Composite hovered near 23,420, down about 0.7%.
The Dow Jones Industrial Average fell roughly 193 points, or 0.4%, to trade around 48,500.
Tech stocks bore the brunt of the selling. The Technology Select Sector ETF fell roughly 0.6% to 0.7% as investors trimmed positions in momentum names.
Nvidia, the world’s most valuable company, pulled back 1.6 to 2.5% after announcing a $20 billion acquisition of Groq’s inference assets and a $5 billion stake purchase in Intel.
Tesla declined 2 to 4.5%, weighed down by reports of a 7.7% delivery contraction for 2025 and the collapse of a major battery supply deal with South Korea’s LG Energy.
Palantir, Meta, Oracle, and AMD also faced selling pressure.
In contrast, defensive and cash-flow sectors held their own.
Energy shares gained 0.6%, utilities rose 0.5%, and real estate advanced 0.3 to 0.4%, as investors rotated away from high-growth tech.
Materials suffered the deepest decline as gold and silver miners gave back a portion of their extraordinary year-to-date run.
Trading volumes remained light, with many market participants noting that holiday-thinned liquidity was amplifying price swings.
Small selling orders produced outsized moves as institutional investors rebalanced portfolios and locked in year-end gains.
Why tech pull back?
Monday’s pullback follows a stunning week for the broader market.
The S&P 500 reached fresh intraday highs of 6,945.77 on Friday before settling near record levels, completing a year of remarkable gains.
Year-to-date, the S&P 500 has climbed 18%, the Dow is up 14%, and the Nasdaq Composite has surged more than 21% despite an April bear market scare triggered by tariff fears.
Such robust performance naturally invites profit-taking as portfolio managers finalise year-end positioning and harvest losses for tax purposes.
The selling, however, also reflects growing investor skepticism about technology valuations and artificial intelligence spending plans.
Analysts pointed out that the market had priced in perfection, betting that massive AI infrastructure investments by tech giants would deliver strong near-term returns.
But signs of softening demand and missed delivery targets are now prompting a reckoning.
Tesla’s disclosure of lower 2025 deliveries, Oracle’s data center delays, and concerns about whether companies can justify billion-dollar AI spending are raising hard questions about the sustainability of 2025’s rally.
Macro headwinds also warrant attention.
The Federal Reserve cut rates by 25 basis points on December 10, bringing the target range to 3.50-3.75%, initially supporting the rally.
But Treasury yields have edged higher in recent sessions as traders weigh whether inflation could reaccelerate in early 2026, tempering enthusiasm for rate-sensitive growth stocks.
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