Nasdaq Futures Tumble as Broadcom Tests AI Trade: Markets Wrap
(Bloomberg) — Stocks fell after a disappointing outlook from Broadcom Inc. triggered concern that the blistering rally in technology shares had gone too far.
Futures for the Nasdaq 100 dropped 1.1%, while those for the S&P 500 slipped 0.3%. Broadcom, which added around $150 billion in market value just this week, slumped 14% in US premarket trading after its forecast for artificial-intelligence semiconductor revenue in the current quarter fell short of expectations.
A downturn in chipmakers extended to other tech corners, with cybersecurity firm Crowdstrike Holdings Inc. dropping 10% even after raising its revenue forecast. The sector also fueled losses in Asia, where South Korea’s Kospi index fell 1.8%. Europe’s benchmark rose 0.2%, reflecting tech’s smaller weighting.
Concern over the AI trade threatens to dent a record-breaking rally that has seen global gauges shake off worries about the biggest disruption to oil markets in history. The risk-off tone comes even as Brent heads for its first daily retreat of the week, sliding 3.1% to below $95 a barrel.
“Valuations are looking slightly frothy in pockets of the market which have seen the strongest gains over recent weeks,” said Wolf von Rotberg, equity strategist at Bank J Safra Sarasin. “A leadership change in equities is not unlikely at this point, with less powerful drivers than tech taking over.”
Treasuries rebounded, with the 10-year yield down four basis points at 4.45%. Ahead of Friday’s payrolls report, weekly data showed initial jobless claims rose more than expected. The dollar weakened 0.2%. Bitcoin hit a four-month low as the cryptocurrency headed for its longest streak of losses since August.
“The big issue is that as Bitcoin falls below its estimated mining cost ($60,000 to $70,000), the last obvious valuation anchor is disappearing,” said Ipek Ozkardeskaya, senior analyst at Swissquote.
While stocks were under pressure, oil and bonds found some respite even as fighting persisted in Lebanon. A ceasefire between the country and Israel could go into effect in 24 hours, President Joseph Aoun told reporters. Iran said there had been no recent progress in talks with the US.
The standoff has seen markets increasingly bet that oil-driven inflation pressures could trigger a US interest rate hike as soon as October. The upward trend in bond yields could also deflate the euphoria in stock markets, said Benoit Peloille, chief investment officer at Natixis Wealth Management.
“A valuation correction doesn’t need to wait for earnings to deteriorate,” Peloille said. Growth stocks, which investors value on their long-term prospects, are particularly vulnerable when bonds offer attractive risk-free yields, he said.
Also in focus was confirmation from SpaceX that it is seeking to raise $75 billion in an initial public offering to fund expansion of its AI, rocket launch and satellite infrastructure. Based on its filing with the US Securities and Exchange Commission, SpaceX would have a market value of almost $1.77 trillion.
The share sale is set for June 11 and SpaceX is expected to begin trading the following day, according to terms of the deal.
What Bloomberg Strategists Say:
“Since the mid 1990s the SOX has never rallied so hard with so few pullbacks; we’ve essentially matched what the SOX did in the year ending in September 1999 (that rally enjoyed an LTCM base effect). Through late October of that year, chip stocks dropped nearly 18%. It wouldn’t come as a total shock if history repeats, or at least rhymes.”
— Cameron Crise, macro strategist. For the full analysis, click here.
Corporate Highlights:
Blackstone Inc. limited redemptions from its flagship private credit fund for the first time after investors sought to pull 10% of the shares, the latest such fund to cap withdrawals amid a continued investor exodus. HSBC Holdings Plc and AIA Group Ltd. shares fell alongside other Asia-exposed financial stocks after a media report said that some banks have suspended opening Hong Kong bank accounts for clients in mainland China that could be used for overseas investments. Taiwan Semiconductor Manufacturing Co. Chief Executive Officer C.C. Wei said the company’s global chip supply will fall short of AI-fueled demand for years to come, sustaining revenue growth for the firm. Partners Group Holding AG said it is ready to gate other evergreen funds amid rising pressure from investors to access liquidity, a day after the announcement of a first such move prompted a slump in the Swiss firm’s stock. Some of the main moves in markets:
Stocks
S&P 500 futures fell 0.3% as of 8:37 a.m. New York time Nasdaq 100 futures fell 1.1% Futures on the Dow Jones Industrial Average rose 0.9% The Stoxx Europe 600 rose 0.2% The MSCI World Index was little changed Currencies
The Bloomberg Dollar Spot Index fell 0.2% The euro rose 0.4% to $1.1640 The British pound rose 0.3% to $1.3458 The Japanese yen rose 0.1% to 159.85 per dollar Cryptocurrencies
Bitcoin fell 2% to $63,636.02 Ether was little changed at $1,779.72 Bonds
The yield on 10-year Treasuries declined four basis points to 4.45% Germany’s 10-year yield declined two basis points to 3.01% Britain’s 10-year yield declined four basis points to 4.89% Commodities
West Texas Intermediate crude fell 3.3% to $92.81 a barrel Spot gold rose 1.5% to $4,500.13 an ounce This story was produced with the assistance of Bloomberg Automation.
–With assistance from Neil Campling, Henry Ren, James Hirai and Julien Ponthus.
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