Tech Slide Threatens Historic S&P 500 Weekly Run: Markets Wrap

(Bloomberg) — The S&P 500 is set to break a historic weekly run of gains as the artificial-intelligence trade takes another leg lower, with investors also expecting payrolls data to affirm that interest rates will stay higher for longer.

Contracts for the index dipped 0.4% after a flat performance for the week so far. A slide on Friday would mean that the benchmark misses out on a 10th week of gains, which would’ve been the longest such streak since 1985. Nasdaq 100 futures fell a further 1% following Thursday’s rotation out of chipmakers.

Stocks are pulling back after Broadcom Inc.’s outlook for chip sales fell short of high expectations, raising questions over whether the rally in the AI trade had run too hard. The lack of progress toward a deal in the Middle East has also stoked worries that oil prices will remain elevated for some time.

“Following a period of upward revisions to earnings expectations across the sector, investors are taking a more selective approach to new information and guidance updates,” said Tomás García-Purriños, senior asset allocation strategist at Santander Asset Management. “We would view the recent weakness primarily as profit-taking and consolidation after a strong run.”

The chase for tech stocks took a further knock after S&P Dow Jones Indices said it would keep its eligibility criteria for benchmarks such as the S&P 500, rejecting proposals that would’ve allowed mega-caps to gain entry more quickly after going public.

The decision means companies such as SpaceX, Anthropic PBC and OpenAI would have to wait at least a year for inclusion in the US benchmark after their debut. Fast inclusion in the S&P 500 would’ve led to about $14 billion in forced passive buying for SpaceX, according to Bloomberg Intelligence estimates.

Treasuries were little changed ahead of Friday’s jobs report for May, with the 10-year yield at 4.47%. Brent edged lower to around $94.80 a barrel. The dollar headed for its biggest drop in more than a week.

Friday’s jobs data will likely show a solid increase in payroll numbers, suggesting the strong March and April reports reflected underlying momentum rather than just a rebound from earlier weakness, according to Bloomberg Economics.

The report may not offer strong direction for stock markets, as a focus on signs of price pressures is keeping investors to expect a rate hike as soon as December. Barclays Plc derivatives strategists noted this week that the implied move of 55 basis points is much lower than the average realized move over the past year.

“Employment figures should not move the needle unless there is a major surprise,” said Roberto Scholtes, head of strategy at Singular Bank. “Instead, the key variables to watch are 10- and 30-year Treasury yields, which are hovering around the 4.5% and 5% ‘pain threshold’ levels.”

What Bloomberg Strategists Say:

“With SpaceX, Anthropic and OpenAI listings still to come, frothier-for-longer may still be the byword on Wall Street. But Broadcom’s disappointment could ultimately turn out to be the first inflection point in the AI narrative. Investors need to ponder whether it takes us one step closer to a Minsky moment, a sudden and major collapse of asset values.”

— Ven Ram, cross-asset strategist. For the full note, click here.

Corporate Highlights:

Underwriters on SpaceX’s $75 billion initial public offering have been told not to accept orders from investors in Hong Kong and China, citing US restrictions around the export of critical technology, people with knowledge of the matter said. Lululemon Athletica Inc. shares slumped 12% in premarket trading after lowering its annual forecast due to deteriorating performance in North America, Nvidia Corp. has certified the three biggest memory chipmakers to supply their most advanced high-bandwidth products for the US company’s AI accelerators, Chief Executive Officer Jensen Huang confirmed for the first time. Anthropic PBC called for the creation of an industrywide mechanism to pause the development of artificial intelligence, giving society the opportunity to “deal with its immense implications.” Some of the main moves in markets:

Stocks

S&P 500 futures fell 0.4% as of 7:30 a.m. New York time Nasdaq 100 futures fell 1% Futures on the Dow Jones Industrial Average rose 0.1% The Stoxx Europe 600 rose 0.3% The MSCI World Index was little changed Currencies

The Bloomberg Dollar Spot Index fell 0.2% The euro rose 0.2% to $1.1639 The British pound rose 0.4% to $1.3471 The Japanese yen was little changed at 159.90 per dollar Cryptocurrencies

Bitcoin fell 1.8% to $62,453.87 Ether fell 5.4% to $1,677.36 Bonds

The yield on 10-year Treasuries was little changed at 4.47% Germany’s 10-year yield was little changed at 3.03% Britain’s 10-year yield declined one basis point to 4.89% Commodities

West Texas Intermediate crude fell 0.1% to $92.94 a barrel Spot gold fell 0.2% to $4,466.14 an ounce This story was produced with the assistance of Bloomberg Automation.

–With assistance from Neil Campling, Christian Dass and Subrat Patnaik.

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