A wave of selling hit the Nasdaq Composite (Nasdaq) and semiconductor stocks last Friday, leaving the Nasdaq to suffer a harsh distribution day as it tumbled 4.2% in higher volume than the prior day.
The S&P 500, Nasdaq, and Dow Jones Industrial Average (Dow) swung to record highs last week, but pulled back amid heightened tensions in the Iran war and concern that the solid labor market data would lead to more hawkish monetary policy.
The S&P 500 lost more than 2% on the week for its first negative week in 10. The Nasdaq tumbled 4.7% following Friday’s losses, while the 30-stock Dow was modestly lower on the week.
Last Friday, the VanEck Semiconductor ETF (SMH) plunged 9.2% as Intel (INTC) and Advanced Micro Devices (AMD) both closed lower by around 11%. The Nasdaq-100 swooned 4.8%, weighed down by big drops for memory and storage leaders like Sandisk (SNDK) and Western Digital (WDC) logged losses of 13% to 14% and are finally nearing tests of their 21-day exponential moving averages.
Shares in Broadcom were nearly 8% lower last Friday after tumbling more than 12% on Thursday. Marvell Technology dropped more than 16% Friday. Micron Technology, the memory chipmaker that’s been the latest star of the bull market, was down 13% last Friday after dropping 8% on Thursday.
The Cboe Volatility Index, known as the VIX, soared more than 30% and closed just above the 20 level. It’s known as Wall Street’s fear gauge, and readings above 20 generally point toward more uncertainty and risk.
The sell-off prompted Investors Business Daily (IBD) to lower its stock market recommended exposure a notch to 60%-80% from 80%-100%. That means now’s the time to assess current holdings.
A tough day Friday left the Dow, the S&P 500 and especially the Nasdaq with black eyes. But the stock market power trend, as defined by IBD trading rules, remains intact.
A power trend — an uptrend showing unusually strong inertia — typically does not end until the chart for the Nasdaq or the S&P 500 shows the 21-day exponential moving average cross below the 50-day moving average.
The 10-year Treasury yield was slightly lower, near 4.47% ahead of the release of jobs data. But the yield spiked to 4.55% on news that nonfarm payrolls increased 172,000 in May, more than double the Econoday consensus for 85,000. April data was revised slightly higher as well. The strong jobs data raised the odds that a quarter-point rate hike by the Federal Reserve (Fed) could come before the December meeting.
Looking ahead to this week, investors will monitor additional developments in the Middle East, the Consumer Price Index (CPI), the Producer Price Index (PPI), and trade balance data. Other key reports include consumer sentiment, housing market data, and small business optimism. Additionally, investors expect SpaceX to begin trading at the end of the week.
Click the Looking Ahead link below, which will take you to research from WellsFargo. Below are excerpts from that report.
Week review: June 1-5
Economic news
- The jobs report for May showed the labor force has taken a positive turn amid artificial intelligence developments and geopolitical tensions. Strong hiring efforts created breadth in multiple sectors, supporting optimism for new job seekers in the future.
- Non-form payrolls rose by 172,000, as numbers continued to surpass expectations for the third month. The surge was mainly led by 70,000 in the leisure and hospitality sector.
- The unemployment rate held steady at 4.3%, as expected.
- Average hourly earnings increased slightly by 0.3% month-over-month (M/M).
- The ADP Employment Change Report for May showed that 122,000 private-sector jobs were added. Payroll growth was primarily driven by education and health services.
- The Job Openings and Labor Turnover Survey (JOLTS) report showed that openings in professional and business services increased by 668,000 in April, placing job openings at 7.618 million, the highest since November 2024.
- In May, ISM PMIs both increased further into expansionary territory, as services continue to lead manufacturing.
- The manufacturing reading rose to 54.0, with new orders rising to 56.8. The backlog of orders as well as new domestic and foreign orders increased. Demand for manufacturing goods outpaced supply and driving the strongest expansion in the factory sector since May 2022.
- The services reading rose to 54.5, beating expectation of 53.8. As supply chains are gradually becoming less strained, inventories are growing rapidly.
- Factory orders surged by 4.8% M/M in April, alongside an 8% increase in goods orders.
- Construction spending in April increased with heightened residential, power infrastructure, and data center activity. This rebound was largely associated with recovery from weather-related weakness during the winter.
- Construction spending increased 0.4% M/M; while private residential construction rose 0.8% M/M.
Looking Ahead to this week, June 8-12
U.S.
- The focus of the week will be May inflation data, with CPI on Wednesday and PPI on Thursday.
- Attention will then shift to Friday’s preliminary June consumer sentiment and inflation expectations from the University of Michigan.
- Also on tap: May’ s small business optimism, existing home sales, and federal budget balance, along with April’s trade balance and wholesale trade sales.
- Rounding out the docket is the Fed’s measure of first-quarter household net worth.
- Investors will also monitor for any developments in the Iran war after ballistic missiles were launched from Iran over the weekend.
Asia
- In China, the highlight will be May’s CPI, PPI, trade balance, foreign reserves, and money supply.
- From Japan, look for finalized first-quarter gross domestic product (GDP), along with April’s finalized industrial production and May’s PPI, money supply, and preliminary machine tool orders.
- Elsewhere in the region, South Korea’s May unemployment rate and preliminary first-quarter GDP will be released. In addition to Australia’s May business confidence and June consumer confidence.
Europe
- In Europe, the highlight will be Thursday’s European Central Bank policy meeting, along with finalized regional May CPI readings.
- In Germany, watch for April’s trade balance and industrial production, in addition to May’s Wholesale Price Index.
- Meanwhile, releases from the U.K. include April’s monthly GDP, industrial production, Index of Services, and trade balance, along with May’s house price balance.
