Key facts
- The S&P 500's nine-day winning streak has ended.
- The S&P 500 fell 2.6% and the Nasdaq Composite fell 4.2% on Friday.
- The Nasdaq Composite experienced its largest one-day point drop on record, falling over 1,121 points.
- The S&P 500 saw its market value decrease by an estimated $1.8 trillion.
- U.S. nonfarm payrolls for May showed 172,000 jobs added.
- Odds of a Federal Reserve rate hike increased to 68.3% after the jobs report.
- Broadcom shares tumbled over 12% after disappointing results and AI chip sales forecast.
- Marvell Technology's stock surged over 30% after Nvidia's CEO identified it as a future trillion-dollar company.
- South Korea's Kospi index fell 6.29%, its worst performance this year.
- Japan's Nikkei 225 dropped 1.34%.
- European shares ended lower, with the STOXX 600 down 0.5% for the week.
- Bitcoin prices dropped significantly, mirroring the tech stock decline.
Global stock markets experienced a sharp downturn and subsequent volatility, primarily driven by a stronger-than-expected U.S. jobs report for May, which added 172,000 jobs and increased expectations for Federal Reserve rate hikes to 68.3% odds. This data led to the end of the S&P 500's nine-day winning streak, with the index falling 2.6% and its market value decreasing by an estimated $1.8 trillion. The Nasdaq Composite saw its largest one-day point drop on record, falling over 1,121 points and down 4.2% on the day. Technology and chip stocks were at the forefront of the decline, with Broadcom's shares tumbling over 12% after releasing disappointing earnings and a weak AI chip sales forecast. This selloff impacted Asian and European markets, with South Korea's Kospi index falling 6.29% and Japan's Nikkei 225 dropping 1.34%.
Despite the broad selloff, some sectors and markets showed resilience or rebounded. Chipmakers, including Marvell Technology, saw surges following positive analyst coverage and identification as future trillion-dollar companies, with Marvell surging over 30% after Nvidia's CEO highlighted its potential. U.S. stock futures pointed to a higher open on Monday as chipmakers showed signs of recovery, and easing Middle East tensions provided some relief. European shares, which had slipped, were poised for a rebound, and tech stocks saw a pause in their rally. Bitcoin prices also dropped significantly, mirroring the tech stock tumble, indicating a broader risk-off sentiment. Lululemon shares fell approximately 8% after cutting its annual profit forecast due to product missteps and negative commentary.
The current market dynamics are shaped by several underlying factors. The artificial intelligence (AI) trade has been a significant driver of recent rallies, leading to increased market concentration in tech stocks, which now represent over 39% of the S&P 500's market capitalization. This concentration raises concerns about market breadth and diversification. Additionally, geopolitical tensions, particularly in the Middle East, have contributed to market uncertainty, although recent de-escalation provided some relief. Analysts remain cautious, citing geopolitical risks and potential shifts in Federal Reserve policy, while also noting strong earnings momentum in some sectors. Citigroup raised its year-end target for the S&P 500 to 8,100, citing AI-driven capital expenditure and strong corporate earnings.