Key facts
- Global stock markets experienced significant declines due to a tech sell-off.
- Strong U.S. jobs data fueled fears of Federal Reserve rate hikes.
- South Korea's KOSPI plunged over 8%, its worst performance this year.
- The Nasdaq Composite recorded its largest one-day point drop on record, falling over 1,121 points.
- The S&P 500 lost an estimated $1.8 trillion in market value.
- Broadcom's shares tumbled over 12% after a weak forecast.
- Marvell Technology's stock surged over 30% on AI optimism.
- U.S. nonfarm payrolls for May showed 172,000 jobs added.
- Geopolitical tensions and rising oil prices contributed to market volatility.
- Bitcoin prices dropped significantly, mirroring the tech stock decline.
Global stock markets experienced widespread declines, mirroring a significant tech sell-off on Wall Street. South Korea's KOSPI led the losses, plunging over 8% and marking its worst performance this year, while other Asian markets also tumbled. European shares slipped, with the STOXX 600 down 0.3% on Friday and 0.5% for the week, reaching a two-week low. The Nasdaq Composite recorded its largest one-day point drop on record, falling over 1,121 points, and the S&P 500 saw its market value decrease by an estimated $1.8 trillion, ending its nine-day winning streak.
Several factors contributed to the downturn. Stronger-than-expected U.S. jobs data for May, which showed 172,000 jobs added, significantly increased expectations of Federal Reserve rate hikes, with markets pricing in a 68.3% chance. This data also impacted bond markets, which declined sharply. Technology and chip stocks were particularly hard hit. Broadcom's shares tumbled over 12% after releasing disappointing results and a weak AI chip sales forecast, while other chip stocks fell following its report, questioning AI demand. Nvidia was down 6.2% and Meta down 5.5% on Friday. However, Marvell Technology's stock surged over 30% after Nvidia's CEO identified it as a future trillion-dollar company. SoftBank shares fell 11% amid concerns about its AI investments. Assets in leveraged ETFs focused on AI and tech have doubled in two months, indicating increased investor confidence and a strong bet on the sector.
The market's current rally faced a significant test, with tech earnings reports due. The concentration of U.S. technology stocks within the S&P 500 now exceeds 39% of its market capitalization, fueled by AI enthusiasm, raising concerns about market breadth. Geopolitical tensions, including those in the Middle East and rising oil prices, further added to market volatility. Brent crude prices remained elevated at $95 a barrel. Bitcoin prices also dropped significantly, mirroring the decline in tech stocks, suggesting a broader risk-off sentiment. Despite the overall market weakness, the Dow Jones Industrial Average reached a record closing high, and the S&P 500 had previously extended its winning streak to nine consecutive days, reaching a new record high above 7600 before this sell-off.
Looking ahead, investors are awaiting key inflation data and further economic insights from upcoming payroll figures. Citigroup has raised its year-end target for the S&P 500 index to 8,100 from 7,700, citing strong corporate earnings and a potential AI-driven capital expenditure supercycle. The firm also raised its earnings-per-share forecast for 2026 and introduced a preliminary target for 2027, while cautioning about AI growth persistence beyond that year. JPMorgan's framework suggests May nonfarm payrolls will be important but not dominant due to broader macro risks, anticipating a scenario of 75,000 job gains if yields remain stable.