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WALL STREET TUMBLES; CHIPS MAKE RECORD-FAST DROP INTO A CORRECTION

Wall Street indexes ended lower with the Nasdaq composite's .IXIC 4.2% tumble leading losses with pressure from the technology sector, and in particular semiconductors, as reverberations were still being felt after heavyweight chip maker Broadcom AVGO.O issued disappointing guidance after the close on Wednesday

Also, Friday's much stronger than expected jobs report for May fueled concerns that high inflation would increase the likelihood of Federal Reserve interest rate hikes.

After marking a record closing high as recently as Wednesday, the Philadelphia semiconductor index .SOX confirmed it was in a correction on Friday finishing down 10.3% for the day and more than 12% from its record close.

It was the index's biggest one-day drop since a 15.9% slide on March 16, 2020, during the Covid panic, and the biggest two-day retreat since a 16.7% collapse on April 4, 2025, when investors were in a panic over U.S. President Donald Trump's tariff policies.

Thus, while the index has had bigger one- and two-day drops in the past, this was its fastest-ever fall from a record close into a correction, using LSEG data back to mid-1994.

Anthony Saglimbene, chief market strategist at Ameriprise Financial cited both Broadcom's report and the jobs report as the reasons for Friday's massive selloff, which he described a "healthy reset."

"Wednesday, we got a very good earnings report from Broadcom but its guidance was softer. We saw the selling pressure on Thursday that extended to today. It's gone beyond just Broadcom, it's gone into the other AI chip makers, it's gone into AI adjacent companies," said Saglimbene.

"Investors are just looking for an excuse to take some profits. We've had nine straight weeks of the S&P 500 going higher, eight out of nine for the Nasdaq. We've had a tremendous run from the March lows."

Meanwhile, after the strong jobs report trader bets for a 25-basis point rate hike from the Fed went up to 42.8% probability from 38.2% on Thursday and bets for a 50-basis point hike went to 22.4% probability from 10.95 the day before, according to the latest data from CME Group's FedWatch tool.

"That's telling you that the job market is healthy, but it could add to inflation pressures, which are already higher because of higher energy prices," said Saglimbene. "Think about where we were nine weeks ago or at beginning of the year. Most of the market thought we'd be cutting rates."

Carol Schleif, Chief Market Strategist at BMO Private Wealth said some investors may be using the selloff as "an excuse to sideline some funds for upcoming IPOs" and she added: "Tech has been on a tear and is still up high teens over the past three months. A bit of pause is warranted!”

Meanwhile Peter Tuz, president of Chase Investment Counsel said the selloff wasn't unwarranted because chip companies have been doing so well recently. He also added that "there is some concern about the big calendar of IPOs starting next week adding additional risk to the market."

One hotly anticipated IPO expected to take place next week is Elon Musk's Spacex.

Meanwhile back on earth, the S&P 500 technology index was the biggest decliner out of the benchmark's 11 major industry sectors falling a stunning 5.8%, which was its biggest one-day loss since early April last year. It has fallen 8.5% over three sessions. The next biggest losers were consumer discretionary .SPLRCD and materials .SPLRCM, both down more than 2%.

The biggest gainers on Friday we defensive consumer staples .SPLRCS, up 1.6%, followed by utilities .SPLRCU, up 0.8%

Here is your closing snapshot:

(Sinéad Carew, Terence Gabriel)

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