Stocks retreated Friday, as Wall Street wrapped up the week defined by a rotation out of this year's megacap winners in favor of smaller names.

The S&P 500 dropped 0.71%, closing at 5,505.00. Nasdaq Composite slid 0.81% to end at 17,726.94. The Dow Jones Industrial Average fell 377.49 points, or 0.93%, to 40,287.53.

Friday's moves marked another day of declines across the board, with the Russell 2000 down 0.63%. But a shift toward names viewed as bigger beneficiaries of interest rate cuts from the Federal Reserve, like small caps, still appears to be theme of the week.

The S&P 500 and Nasdaq slipped 1.97% and 3.65%, respectively, marking their biggest weekly losses since April. The tech-heavy Nasdaq also snapped a six-week win streak. On the other hand, the Dow advanced 0.72%, while the small cap-focused Russell 2000 climbed 1.68%.

"The stock market is experiencing a long overdue rotation," said Glen Smith, chief investment officer at GDS Wealth Management. "Investors are taking money out of big tech stocks which have performed so well and moving that money into other areas of the market."

That divergence has encouraged some Wall Street pros, who had worried that the market rally was becoming too dependent on a handful of massive tech stocks. Meanwhile, rising optimism around forthcoming interest rate decreases from the Fed have bolstered smaller and more cyclically oriented names.

A shift away from megacap artificial intelligence beneficiaries can explain the Nasdaq's underperformance this week. Similarly, the information technology sector led the broad S&P 500 lower with a 5.1% drop.

"The headline is 'these are down' with some of the momentum stocks getting hit," said Chris Verrone, head of technical and macro research at Strategas, on CNBC's "Squawk Box." But, "the breadth under the surface these last two weeks has been absolutely spectacular."

CrowdStrike tumbled 11.1% following a major information technology outage that impacted business around the world. The New York Stock Exchange and Nasdaq both said trading did not appear affected.