Stocks Settle Sharply Lower as Tech Companies Routed

Stocks Settle Sharply Lower as Tech Companies Routed

The S&P 500 Index SPY on Friday closed down -2.64%, the Dow Jones Industrial Average DIA closed down -1.35%, and the Nasdaq 100 Index QQQ closed down -4.77%. June E-mini S&P futures (ESM26) fell -2.97%, and June E-mini Nasdaq futures (NQM26) fell -5.09%.

Stock indexes sold off sharply on Friday, with the S&P 500 and Nasdaq 100 posting 2-week lows. Investors rotated out of AI-infrastructure and semiconductor companies and sold megacap technology stocks that earlier this week pushed US stock indexes to all-time highs. Technology stocks retreated amid long liquidation and profit-taking after Broadcom’s outlook for chip sales fell short of high expectations, raising concerns that the AI trade rally has been excessive.

Stock indexes added to their losses on Friday as bond yields soared on the stronger-than-expected US May payrolls report, bolstering speculation that the Fed’s next interest rate move will be a rate hike. The 10-year T-note yield rose to a 2-week high of 4.55%.

US May nonfarm payrolls rose +172,000, stronger than expectations of +88,000. Also, Apr nonfarm payrolls were revised upward to +179,000 from the previously reported +115,000. The May unemployment rate remained unchanged at 4.3%, right on expectations.

US May average hourly earnings rose +0.3% m/m and +3.4% y/y, right on expectations.

US Apr consumer credit increased by $20.733 billion, stronger than expectations of $17.670 billion.

Crude oil prices fell more than -2% on Friday, even as the US and Iran have made little progress in talks over an interim peace deal, with clashes between Israel and Hezbollah militants continuing in Lebanon. Iran insists on a ceasefire in Lebanon before accepting a US deal to extend the truce and reopen the Strait of Hormuz. President Trump said Thursday that negotiations with Iran are in the “final” stages without elaborating, while Iran’s Foreign Minister Abbas Araghchi earlier said there had been “no tangible progress” even though both sides continue to exchange messages via mediators.

The markets are discounting a 1% chance of a +25 bp rate hike at the next FOMC meeting on June 16-17.

The generally favorable Q1 earnings season is winding down. As of Friday, 84% of the 496 S&P 500 companies that reported Q1 earnings have beaten estimates. Q1 S&P 500 earnings are projected to climb +12% y/y, according to Bloomberg Intelligence. Stripping out the technology sector, Q1 earnings are projected to increase around +3%, the weakest in two years.

Overseas stock markets settled lower on Friday. The Euro Stoxx 50 closed down -0.68%. China's Shanghai Composite fell to a 7-week low and closed down -0.74%. Japan's Nikkei Stock Average closed down -1.31%.

September 10-year T-notes (ZNU6) on Friday closed down -16.5 ticks, and the 10-year T-note yield rose +6.9 bp to 4.542%. Sep T-note prices tumbled to a 2-week low on Friday, and the 10-year T-note yield rose to a 2-week high of 4.552%. T-notes retreated on Friday amid a stronger-than-expected increase in US May nonfarm payrolls and a sharp upside revision to April nonfarm payrolls, bolstering speculation that the next Fed move will be an interest rate increase.

European government bond yields moved higher on Friday. The 10-year German Bund yield climbed to a 2-week high of 3.051% and finished up +1.6 bp to 3.038%. The 10-year UK gilt yield rose +0.5 bp to 4.903%.

Eurozone Q1 GDP was revised downward to -0.2% q/q and +0.3% y/y from the previously reported +0.1% q/q and +0.8% y/y.

Swaps are discounting a 100% chance of a +25 bp ECB rate hike at its next policy meeting on June 11.

Chipmakers and AI-infrastructure stocks are retreating for a second day today after Broadcom’s outlook for chip sales fell short of high expectations, raising concerns over whether the rally in the AI trade has been excessive. Marvell Technology MRVL closed down more than -16% to lead losers in the Nasdaq 100, and Micron Technology MU closed down more than -13%. Also, ARM Holdings Plc ARM closed down more than -12%, and Intel INTC, Sandisk SNDK, ON Semiconductor ON, and Western Digital WDC closed down more than -10%. In addition, Advanced Micro Devices AMD and Qualcomm QCOM closed down more than -9%, and Applied Materials AMAT, KLA Corp KLAC, Seagate Technology Holdings Plc STX, and Lam Research LRCX closed down more than -8%. Finally, Broadcom AVGO, NXP Semiconductors NV NXPI, and Microchip Technology MCHP closed down more than -7%, and ASML Holding NV ASML and Texas Instruments TXN closed down more than -6%.

The Magnificent Seven technology stocks fell sharply on Friday. Tesla TSLA and Nvidia NVDA closed down more than -6%, and Meta Platforms META closed down more than -5%. Also, Amazon.com AMZN closed down more than -3%, and Microsoft MSFT closed down more than -2%. In addition, Alphabet GOOGL and Apple AAPL closed down more than -1%.

Cryptocurrency-exposed stocks sank on Friday, as Bitcoin GLXY closed down more than -11%, and MARA Holdings MARA and Riot Platforms RIOT closed down more than -10%. Also, Coinbase Global COIN closed down more than -7%, and Strategy MSTR closed down more than -6%.

Mining stocks sold off on Friday as gold, silver, and copper prices plunged. Hecla Mining HL closed down more than -12%, and Coeur Mining CDE closed down more than -11%. Also, Southern Copper SCCO closed down more than -10%, and Freeport McMoRan FCX closed down more than 9%. In addition, Anglogold Ashanti AU closed down more than -8%, and Newmont Corp NEM and Barrick Mining B closed down more than -7%.

Defensive consumer staple companies rallied on Friday amid the broader market's plunge. Clorox CLX closed up more than +5%, and Procter & Gamble PG closed up more than +4% to lead gainers in the Dow Jones Industrials. Also, Kimberly-Clark KMB and Colgate-Palmolive CL closed up more than +4%, and Coca-Cola KO and Tyson Foods TSN closed up more than +3%.

Guidewire Software GWRE closed down more than -9% after forecasting Q4 subscription and support revenue of $259 million to $265 million, the midpoint below the consensus of $263.6 million.

Lululemon Athletica LULU closed down more than -8% after cutting its 2027 net revenue forecast to $11 billion to $11.15 billion from a previous forecast of $11.35 billion to $11.50 billion, below the consensus of $11.49 billion.

DocuSign DOCU closed down more than -6% after forecasting a full-year adjusted gross margin of 81.5% to 82%, the midpoint below the consensus of 81.8%.

Fiserv FISV closed down more than -3% after BNP Paribas downgraded the stock to underperform from neutral with a price target of $46.

Cooper Cos COO closed up more than +8% to lead gainers in the S&P 500 after reporting Q2 net sales of $1.08 billion, better than the consensus of $1.05 billion.

G-III Apparel Group Ltd GIII closed up more than +5% after boosting its 2027 adjusted EPS forecast to $2.15 to $2.25 from a previous estimate of $2.00 to $2.10, above the consensus of $2.09.

ServiceTitan TTAN closed up more than +4% after reporting Q1 revenue of $268.8 million, above the consensus of $256.7 million.

Chipotle Mexican Grill CMG closed up more than +4% after JPMorgan Chase upgraded the stock to overweight from neutral with a price target of $35.

Campbell's Company/The (CPB), Graham Corp (GHM), Hub Group Inc (HUBG), Mama's Creations Inc (MAMA), Mission Produce Inc (AVO), Motorcar Parts of America Inc (MPAA), Nano-X Imaging Ltd (NNOX), Oil-Dri Corp of America (ODC), Replimune Group Inc (REPL), Vail Resorts Inc (MTN), XCF Global Inc (SAFX).

On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes.For more information please view the Barchart Disclosure Policy here.