Wall Street experienced a sharp decline on Friday, with the tech-heavy Nasdaq Composite index falling 4.77% to close at 28,957.60, marking its biggest single-day drop since April 2025. According to latest reports, the broader market also suffered significant losses, with the S&P 500 dropping 2.64% to end at 7,383.74 and the Dow Jones Industrial Average losing 695.15 points (1.35%) to settle at 50,866.78. The crash was primarily driven by concerns over Federal Reserve interest rate policy following a robust US jobs report. The S&P 500 Information Technology Sector was down 4.6%, by far the worst performance of the 11 sectors tracked by the benchmark index, with only four of 73 stocks in positive territory. For the week, the Nasdaq Composite tumbled 4.5% following Friday's losses, while the S&P 500 lost more than 2.6% for its first negative week in 10 weeks, ending Wall Street's remarkable nine-week winning streak.
The Nasdaq's decline was heavily influenced by a violent sell-off in the semiconductor sector, with the iShares Semiconductor ETF dropping 10% for its worst day since March 2020. As reported by Nationwide, "Investors had been kind of hovering with their finger over this sell button. Not necessarily to get out. But if you've owned some of these semiconductor names through the last two months, you're very out of whack with your long term positioning goal." Broadcom shares were nearly 8% lower after tumbling more than 12% on Thursday, while Marvell Technology dropped more than 16% on Friday. Intel and Advanced Micro Devices fell around 11%, and Micron Technology, the memory chipmaker that's been the latest star of the bull market, was down 13% after dropping 8% on Thursday. The weakness in Broadcom shares was particularly notable, as the company's relatively weak guidance on Wednesday had already spurred fears that AI demand may not grow as quickly as estimated. Nvidia, the world's most valuable company by market capitalisation, slumped 6.2%, while Intel, Micron Technology, AMD and Broadcom dropped between 7.9% and 13.3%.
The market decline was primarily attributed to concerns about Federal Reserve interest rate policy following a better-than-expected US jobs report. According to Gary Schlossberg, market strategist at Wells Fargo Investment Institute, as quoted by The Economic Times, "We are talking about a strong economy. That just adds to inflation risk coming from the Gulf. It makes it difficult for the Fed to even think about rate cuts and might even increase the chances - although we're still not forecasting that yet - of a rate hike by the Fed before the end of the year." The US Bureau of Labor Statistics reported that nonfarm payrolls increased by 172,000 in May, significantly above economists' expectations of 80,000 jobs. The stronger labour market data fuelled concerns that the Federal Reserve may delay interest-rate cuts or even consider further tightening if inflation remains persistent. Per the CME FedWatch tool, investors now forecast that the Federal Reserve has about a 50% chance of raising interest rates at its late-October meeting, up from roughly 34% just yesterday. The 10-year Treasury yield climbed above 4.5%, while the 30-year yield rose beyond 5%, key levels that renewed worries about higher borrowing costs and their impact on corporate earnings, particularly for companies driving the artificial intelligence boom.
The market decline extended beyond traditional stocks to digital assets, with cryptocurrencies experiencing significant losses. As reported by The Economic Times, bitcoin tumbled below $60,000 for the first time since late 2024, with the decline mirroring the broader market weakness. Bitcoin fell below $60,000 for the first time since October 2024, with cryptocurrency-tied stocks Strategy (MSTR), Robinhood Markets (HOOD), MARA Holdings (MARA), and Coinbase Global (COIN) declining between 6.5% and 11%. The decline in digital assets mirrored the broader market weakness, reflecting investor concerns about the potential impact of higher interest rates on risk assets. According to AMBCrypto, the crypto market turned sharply bearish this week, driven by heavy ETF outflows, a shift in capital toward AI and equity markets, and renewed macro uncertainty, leading to liquidations and risk-off sentiment across the sector.
According to Mark Hackett, chief market strategist at Nationwide, "People looking to get into the SpaceX IPO next week, it's unlikely they're going to use Procter & Gamble funds to fund it. It's going to be some of these AI trades, the semis, the momentum names, or at least tech in general." Investors rotated into healthcare and staples stocks on Friday as they dumped tech shares, with Colgate-Palmolive adding 4% and Coca-Cola up more than 3%. Johnson & Johnson was up 2%. Despite Friday's sharp decline, investors largely viewed the move as a rotation away from richly valued technology stocks rather than the beginning of a broader market panic. Many investment funds reduced exposure to AI and semiconductor companies after a powerful multi-year rally, amid growing concerns that valuations may have become stretched. The iShares Semiconductor ETF is still up 79% on the year even after the recent declines, highlighting the sector's strong performance despite recent volatility.
