While there had initially been gains in tech names, particularly artificial intelligence related stocks, sentiment grew more stretched as the week progressed. Broadcom saw its shares tumble as the chipmaker’s second quarter earnings missed expectations. Then the May jobs report which was released on Friday pressured tech names; non-farm payrolls breezed past expectations, boosting expectations that the Federal Reserve would raise rates later this year.
The Nasdaq Composite shed 4.2% on Friday, pushing it to a weekly loss of 4.7% in its sharpest decline in over a year. Meanwhile, the S&P 500 lost 2.6% overall, snapping a nine-week winning streak. Losses on the Dow Jones Industrial Average were less severe however it was still down 0.3%. All three indices had earlier in the week been at record highs. Investors also continued to pay close attention to developments in the Middle East, with some optimism that a ceasefire deal between Israel and Lebanon could pave the way for a resolution to the US-Israeli war with Iran, however the deal itself proved doubtful with Hezbollah rejecting it. This pushed up oil prices, with Brent crude up 1.3% for the week. Treasury yields jumped after the non-farm payrolls report, with the 2-year note reaching a 15-month high and the 10-year yield ending up at 4.55%.
European markets were also weighed down by uncertainty around the Middle East conflict, while European chipmakers declined in tandem with US peers. In addition, there were concerns around the Trump administration imposing new tariffs of 10% to 12.5% on a number of countries. Financial stocks came under strain after Partners Group halted withdrawals on a private equity fund which had been faced with worries that assets could be overvalued. For the week, the pan-European STOXX 600 dropped 0.5%. Most regional indices were lower for the week although France’s CAC 40 was one of the few gainers, up 0.4%.
Chinese markets ended the week lower with the Shanghai Composite declining 1%. The latest economic data releases pointed to an uneven economic recovery, with the official manufacturing purchasing managers' index coming in at 50 for May, a level of neither expansion nor contraction. South Korea’s Kospi index has seen strong year-to-date gains powered by artificial intelligence, so it was not surprising that it too fell victim to the tech sell-off on Friday, in which it plunged over 5%. Meanwhile, the Korean won sank to its lowest level versus the US dollar since 2009 amid sharp foreign capital outflows. Bucking the wider downward trend, Japan’s Nikkei 225 added 0.4% and managed to hit a new record high earlier in the week before slightly pulling back.