"No reason to worry": the Nasdaq fell 4% - the strongest pace in more than a year

The Nasdaq Composite Technology Sector Index collapsed more than 4% on Friday, June 5, posting its strongest single-day drop since April 2025. The S&P 500 broad market index interrupted a nine-week rally. Investors on Friday sold off securities of chip makers and also worried about unexpectedly strong employment data that could push the Federal Reserve to raise rates this year, CNBC wrote.

- The Nasdaq Composite index of the technology sector collapsed by 4.18% to 25,709.43 points. The Nasdaq 100 index collapsed even more - by 4.77%. Nvidia shares fell by 6.2%, Tesla shares lost 6.5% of their value.

- The S&P 500 broad market index fell 2.6% to 7,383.74 points. It declined at the end of the trading week and thus interrupted the successful series of nine consecutive weeks of growth. Had it rallied this week, the streak would have been the best since 1985. The exception on Friday was the consumer staples sector in the S&P 500, which rose 1.6 percent and during the day posted its best performance since April 2025, Barron's wrote. The information technology sector index in the S&P 500 collapsed 5.8%.

- The blue-chip index Dow Jones Industrial Average lost 1.3%.

- The Russell 2000 index of small and mid-capitalization companies fell 3.47%.

- The CBOE Volatility Wall Street Fear Index (VIX) jumped sharply: it added about 35% at the close of the markets and exceeded 20 points, a psychological mark indicating high volatility.

- Brent crude oil futures were down more than 2%: the price fell below $93 per barrel. The US WTI cheapened by about 3% - to $90.2 per barrel.

- The dollar strengthened by 0.65% against a basket of other world currencies.

- Gold was cheaper by 3.54% to $4316.5.

- Bitcoin was down about 4% overnight, dropping to $60,962. During the day, the value of the largest cryptocurrency by capitalization was below $60,000 for the first time since October 2024, when Donald Trump won the U.S. presidential election.

The technology sector sagged after chip maker stocks collapsed. But what exactly was the catalyst for their reversal this week remains not entirely clear, writes CNBC. There was some disappointment when Broadcom on Wednesday night failed to meet analysts' expectations for AI chip revenue in its quarterly and year-end forecasts, causing the sector to start declining as early as Thursday. However, on Friday the sell-off became much more aggressive.

The Philadelphia Semiconductor Index collapsed 10%. Broadcom shares lost 7.9% after falling more than 12% on Thursday. Marvell Technology and Micron Technology fell 16.7% and 13.3%, respectively. Intel shares collapsed 11.3% and Advanced Micro Devices shares fell 10.9%. However, even after the latest selloff, the Philadelphia Semiconductor Index remains up about 72% since the beginning of the year.

Meta Platforms shares fell 5.5% after the Financial Times reported that the company is considering a major share sale.

In another sign of speculative capital leaving risky assets, bitcoin fell below $60,000 for the first time since the end of 2024, CNBC writes.

Additional pressure on the market came from a jump in Treasury bond yields after a much stronger-than-expected labor market report for Ma. The U.S. Labor Department reported Friday that nonfarm payrolls rose 172,000 jobs in May, while economists surveyed by Dow Jones had expected a gain of only 80,000. The unemployment rate held steady at 4.3%, matching forecasts.

Treasury bond yields rose following the report as investors stepped up bets that the Fed may raise interest rates before the end of the year. Yields on 10-year bonds topped 4.5 percent and 30-year bonds topped 5 percent. Those levels have heightened concerns about a slowing economy and rising borrowing costs for companies investing in AI infrastructure, CNBC noted.

The coordinated sell-off in stocks, bonds and cryptocurrencies was the biggest blow in months to a bull market that began in late March when talks to end the Iran war began in earnest, Bloomberg writes.

Amid the sell-off in technology stocks, investors switched to defensive sectors. Colgate-Palmolive and The Coca-Cola Company rose 4.1% and 3.5, respectively, while Johnson & Johnson shares added 2%.

- "If you look at the bigger picture, a week of decline after an upturn is no reason to worry. The trend remains quite powerful. The market is up more than 10% in almost five months. It's a bull market and a couple days against the trend won't change that," CIBC Private Wealth investment strategist David Donabedian said in a statement to Barron's.

- "Investors have had their finger over the sell button for some time," CNBC quoted Nationwide chief market strategist Mark Hackett as saying. - Not necessarily to get out of the market. But if you've owned these semiconductor stocks for the past two months, their share of your portfolio has already deviated significantly from your long-term benchmarks. Sooner or later, profits need to be locked in."

The analyst also attributes the sell-off in AI companies' shares to the near IPO of SpaceX. Elon Musk's space and AI business has fueled interest in the sector, but has also heightened concerns among some investors that the offering could coincide with the peak of investment hype around AI, Hackett says. "Those looking to participate in the SpaceX IPO next week are unlikely to think of selling Procter & Gamble shares to free up money," he said. - It's more likely that funds will be pulled out of the AI sector, semiconductor companies, growth stocks and the tech sector in general. And when such a process begins, as we saw yesterday, the selling can quickly become quite chaotic."

- "Unexpectedly strong data today reaffirmed the resilience of the U.S. economy, but it's also likely to make both the Fed and financial markets remain focused on inflationary pressures," Morgan Stanley Wealth Management chief economist Ellen Centner said in a Bloomberg statement.

This article was AI-translated and verified by a human editor