(May 16): Wall Street offloaded semiconductor companies and other high-flying technology shares Friday following a weeks-long, record-setting rally as rising bond yields curbed investors’ appetite for risky bets.
The S&P 500 Index slid 1.2% in New York, while the Nasdaq 100 Index sank 1.5%; both benchmarks posted their worst day since late March. Chipmakers led the broad-based decline in equity markets. Friday’s swing lower was the second example of a sharp reversal in momentum this week.
The Philadelphia Stock Exchange Semiconductor Index tumbled 4.0%. Among notable decliners, Nvidia Corp fell 4.4%, Intel Corp shed 6.2%, and Broadcom Inc lost 3.3%. Year-to-date strength in the group made those shares a natural place for cautious investors to take profits.
The rout came as investors around the globe offloaded government bonds, sending borrowing costs higher from Japan to the US after a series of hot inflation prints stoked concern about the prospect of central banks having to raise interest rates this year. The yield on 10-year Treasuries hovered near 4.60%.
“This week’s inflation numbers and the renewed rise in crude oil is raising fears about inflation,” said Matt Maley, chief market strategist at Miller Tabak + Co. “With long-term yields hitting 12-month highs, it’s causing investors to take some chips off the table in the stock market after the enormous six-week run.”
The selloff is unsurprising to some on Wall Street. Bank of America Corp strategists led by Michael Hartnett said the stock market is primed for profit-taking due to investors crowding into equities and rising inflation risks. Growing price pressures are beginning to permeate the US economy at a time when the market is soaring to record highs, he said in a note to clients.
See also: Stocks in focus after bonds send inflation alarm
“Bull capitulation into stocks and tech likely fully complete in next few weeks, early June ripe for taking some off table,” Hartnett wrote.
A similar view was echoed at Barclays plc, where the in-house market-timing indicator is flashing a sell signal for the S&P 500 — the first such event since February 2025.
“Tops can be difficult to time,” Alexander Altmann, the firm’s global head of equities tactical strategies, wrote in a note early Friday. “But enough of the team’s signals are now flashing that we want to neutralise our bullish risk view and turn more cautious near term.”
See also: Trump’s more than 3,700 trades astonish Wall Street insiders
Market pressures are compounding an already difficult environment for stock pickers. Active managers who briefly looked like they might finally have their moment earlier this year are once again confronting a familiar problem: a stock rally driven by a tiny group of tech megacaps that diversified portfolios simply can’t keep up with.
The share of mutual funds outperforming the S&P 500 this year has plunged to just 28%, according to the latest data from Barclays, down from over 60% at the end of February. After benefiting from a rotation out of tech shares and into the broader market, stock pickers are getting left behind as money floods back into a narrow group of AI-fuelled heavyweights.
The reversal has been so sharp that active managers are now headed for their fourth-worst showing in the last 20 years relative to the benchmark, the data show. That’s an ominous turn for an industry already on the defensive after investors yanked roughly US$1 trillion ($1.3 trillion) from active equity mutual funds last year alone.
On the geopolitical front, US President Donald Trump said he didn’t discuss a possible extension of his tariff truce when he met with Chinese leader Xi Jinping during a summit in China. President Trump also said that he didn’t push his Chinese counterpart to pressure Iran to open the Strait of Hormuz.
President Trump’s latest financial disclosures show that he or his investment advisers made more than 3,700 trades in the first quarter, a flurry totalling tens of millions of dollars and involving major companies that have dealings with his administration.
In individual company news, Pershing Square chief executive officer Bill Ackman said he’s taken a new stake in Microsoft Corp after shares declined, saying investors have underestimated the durability of the company’s software. Meantime, China agreed to buy 200 Boeing Co planes, President Trump said, falling short of the 500 737 Max and additional widebody aircraft Chinese airlines were expected to buy.
Sectors in focus:
- Energy shares climbed and miners fell alongside gains for WTI crude futures after Trump said the US doesn’t need the Strait of Hormuz to remain open.
- Shares of semiconductor companies dropped, leading a broad-based decline in equity markets.
Uploaded by Chng Shear Lane
