U.S. equities experienced a decline on Friday, primarily driven by a significant sell-off in chip stocks. The Nasdaq Composite fell by 4.18%, closing at 25,709.43, marking its largest drop since April 2025. The S&P 500 decreased by 2.64% to 7,383.74, while the Dow Jones Industrial Average lost 695.15 points, or 1.35%, settling at 50,866.78.
The decline in the semiconductor sector was attributed to various factors, including disappointment over Broadcom's AI chip outlook and a spike in Treasury yields following a stronger-than-expected jobs report for May. The iShares Semiconductor ETF dropped 10%, with notable declines in shares of Broadcom, Marvell Technology, Intel, and Advanced Micro Devices.
The Bureau of Labor Statistics reported an increase of 172,000 nonfarm payrolls in May, significantly exceeding economists' expectations of 80,000. This report contributed to rising concerns about a slowing economy and increased borrowing costs, as the 10-year Treasury yield rose above 4.5%.
Investors shifted their focus to healthcare and consumer staples, with companies like Colgate-Palmolive and Coca-Cola seeing gains. The likelihood of an interest rate hike by the Federal Reserve increased, with the probability rising to 72.7% following the jobs report.
Despite the recent declines, the iShares Semiconductor ETF remains up 79% year-to-date. The upcoming SpaceX IPO, valued at $1.77 trillion, is also influencing market dynamics as investors adjust their portfolios in anticipation of the event.