Concerns over high valuations of major tech stocks in the U.S., coupled with the longest government shutdown on record, dragged on investor sentiment, leaving stock markets mostly retreating on Friday.

The tech-heavy Nasdaq was in the red while the benchmark S&P recovered slightly on close, following a tumultuous week marked by declines as skepticism mounted over sky-high tech and artificial intelligence valuations and investments.

Large tech names that have propelled major U.S. equity indices to repeat records throughout 2025 were under pressure most of the week, with chipmaker Nvidia losing billions in value soon after it hit a record $5 trillion valuation.

The worries include that "data centers might not be profitable in the near future," said Tom Cahill of Ventura Wealth Management, who also emphasized the drag from the record-length government shutdown.

"There are several data points that suggest that the labor market is really cooling and with all the uncertainty around the government shutdown and tariffs, that's probably going to continue to weigh on hiring," Cahill said.

Heading into a new week, investors will still look for clues about the health of the U.S. economy following worrisome labor market reports and technology-led turbulence. The lack of data, due to the government shutdown, makes it more difficult to gauge the situation and investors are becoming more cautious.

"We're not getting a lot of economic data," said Anthony Saglimbene, chief market strategist at Ameriprise Financial. "At current valuations and the kind of gains that we've seen ... investors are just starting to be a little bit more cautious. I don't think that is bad, but it is coming at a time where there is growing uncertainty around the pace of growth in the economy."

But U.S. President Donald Trump on Friday rejected talk of any AI bubble.

"No, I love AI. I think it's going to be very helpful," Trump said in response to a question by the Agence France-Presse (AFP) reporter about whether there is an AI bubble.

"It's truly going to be the future, and we're leading the world."

U.S. stocks got a boost late in the session on a revised offer from Senate Democratic Leader Charles Schumer that could end the shutdown, although leading Republicans quickly rejected the proposal.

Elsewhere, in Europe, most of the markets also closed weak on Friday, extending the losses from Thursday, in line with Wall Street.

Investors have pointed to the shutdown as a source of unease because of the lack of government data. But analysts said there is also rising worry about the economic impact as well.

'Real damage'

"The longer this lasts, the more damage it does," said Art Hogan of B. Riley Wealth Management.

"We're at the point where investors are starting to realize it is causing real damage."

The shutdown is also denting consumer sentiment, according to a University of Michigan survey that showed a decline in November compared with October.

"With the federal government shutdown dragging on for over a month, consumers are now expressing worries about potential negative consequences for the economy," said surveys director Joanne Hsu.

The University of Michigan data came a day after a report from outplacement firm Challenger, Gray & Christmas showed U.S. layoffs hit the highest level in 22 years last month.

Investors have been forced to use private data as a guide to the state of the world's biggest economy because of the lack of official data.

The shutdown also forced hundreds of flights in the U.S. to be canceled after Trump's administration ordered reductions to ease the strain on air traffic controllers who are working without pay.

The upcoming week would have been a busy week of economic data, with government reports due on consumer and producer prices and retail sales. Those releases are poised to be delayed due to the shutdown. Investors will instead seek insight on the economy from traditionally more secondary reports, including the small business optimism index due to be released on Tuesday by the National Federation of Independent Business.

Fed's next move in question

The lack of government data is, at the same time, muddying the outlook for the Federal Reserve (Fed), which must decide whether to cut interest rates again at its next policy meeting in December. After the central bank eased by a quarter percentage point for a second straight meeting on Oct. 29, Fed Chair Jerome Powell said another such reduction was not a foregone conclusion.

"The Fed needs help trying to figure out what's going on in the jobs market. They're getting seemingly conflicting signals and what they decide to do in December has ramifications, obviously, for the stock market," said Chuck Carlson, chief executive officer at Horizon Investment Services.

Fed funds futures late on Friday were pricing in a roughly 65% chance of a rate cut in December. Before Powell's October comments, investors had viewed such a cut as almost a done deal.

Focus is also on remaining high-profile quarterly reports, as a stellar earnings season in general nears a close.

Reports due this week include Walt Disney and tech stalwart Cisco Systems. Those lead up to the quarterly report the following week from semiconductor firm Nvidia, the largest company in the world by market value, which has symbolized investor enthusiasm for AI.

"I would just expect a little bit more volatility around technology leaders and technology as a whole heading into that Nvidia report," Saglimbene said.