June Nasdaq 100 E-Mini futures (NQM26) are trending down -1.12% this morning as a disappointing forecast from Broadcom led investors to hit pause on the AI trade.
Broadcom (AVGO) plunged over -13% in pre-market trading after the company issued below-consensus FQ3 AI semiconductor revenue guidance. Also, Broadcom CEO Hock Tan said the company will sell $56 billion in AI chips in the fiscal year ending in October, falling short of expectations. In addition, Tan said that major custom-chip client Google was likely to diversify its supply chain and that the expansion of its semiconductor business would weigh on its gross margin.
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Meanwhile, the price of WTI crude fell about -1% on Thursday, snapping a three-day winning streak after Israel and Lebanon late on Wednesday agreed to renew their ceasefire, contingent on Hezbollah halting its attacks, potentially resolving what had become a sticking point in U.S.-Iran talks to end the war. U.S. President Trump said on Wednesday the U.S. could reach a deal with Iran this weekend after earlier asserting that Iran had agreed not to develop a nuclear weapon.
Investors are now awaiting a new round of U.S. economic data and comments from Federal Reserve officials.
In yesterday’s trading session, Wall Street’s three main equity benchmarks closed lower. Software stocks slumped, with Datadog (DDOG) and Atlassian Corp. (TEAM) sliding nearly -7%. Also, cybersecurity stocks slid, with Palo Alto Networks (PANW) dropping over -5% as its strong FQ3 results failed to ease concerns about AI’s impact on the industry. In addition, private credit stocks declined after Cliffwater LLC’s flagship private credit fund reported even higher redemption requests than in the first quarter, with KKR & Co. (KKR) and Ares Management (ARES) slipping more than -4%. On the bullish side, chip and AI infrastructure stocks advanced, with Sandisk (SNDK) climbing over +6% to lead gainers in the Nasdaq 100 and Intel (INTC) rising more than +4%.
Economic data released on Wednesday showed that hiring in the U.S. remained solid in May, services-sector activity continued to expand last month, and new orders from factories picked up in April. The ADP National Employment report showed that U.S. private nonfarm payrolls rose by 122K in May, stronger than expectations of 118K. Also, the U.S. ISM services index rose to 54.5 in May, stronger than expectations of 53.7, while the S&P Global services PMI was revised slightly lower to 50.7. In addition, U.S. April factory orders climbed +4.8% m/m, stronger than expectations of +4.6% m/m and the biggest increase in 11 months.
Meanwhile, the Fed said on Wednesday in its Beige Book survey of regional business contacts that overall economic activity rose at a slight to moderate pace in 10 of the 12 Fed districts in recent weeks. The report noted that employment remained stable, while inflation continued to climb across much of the country, largely driven by the impact of the Middle East conflict on energy prices. “Districts noted that energy-related costs tied to the conflict in the Middle East were the primary driver of inflationary pressures, with spillovers into shipping, packaging, groceries, and fertilizer,” according to the Beige Book. “Consumer uncertainty and concerns about fuel prices impacting households were noted by several districts.”
New York Fed President John Williams said on Wednesday that he does not expect upside risks to inflation stemming from the Middle East conflict to be long-lasting and reiterated that there is no need at this time to change U.S. monetary policy. Also, Fed Governor Michael Barr said that monetary policy is in a good place and is likely to stay there for quite some time. At the same time, Dallas Fed President Lorie Logan said policymakers might need to raise interest rates later this year to return inflation to the central bank’s target. “I am increasingly concerned that higher interest rates could be necessary later this year to fully restore price stability and appropriately balance both sides of the Fed’s dual mandate,” Logan said.
U.S. rate futures have priced in a 96.3% probability of no rate change and a 3.7% chance of a 25 basis point rate cut at the June FOMC meeting.
Today, investors will focus on U.S. Initial Jobless Claims data, set to be released in a couple of hours. Economists expect this figure to be 214K, compared to last week’s number of 215K.
U.S. Unit Labor Costs and Nonfarm Productivity data will also be closely monitored today. Economists forecast final Q1 Unit Labor Costs to rise +2.4% q/q and Nonfarm Productivity to rise +0.5% q/q, compared to the revised fourth-quarter numbers of +4.6% q/q and +1.6% q/q, respectively.
In addition, market participants will be anticipating speeches from Richmond Fed President Tom Barkin and San Francisco Fed President Mary Daly.
On the earnings front, notable companies such as Ciena (CIEN), Samsara (IOT), and Rubrik (RBRK) are set to report their quarterly figures today.
In the bond market, the yield on the benchmark 10-year U.S. Treasury note is at 4.48%, down -0.42%.
The Euro Stoxx 50 Index is up +0.48% this morning, buoyed by hopes for a near-term resolution to the Middle East conflict. Sentiment improved as oil prices fell on Thursday for the first time this week after Israel and Lebanon agreed to renew their ceasefire, contingent on Hezbollah halting its attacks. Retail and luxury stocks outperformed on Thursday. At the same time, semiconductor stocks sank after Broadcom’s quarterly forecast for AI semiconductor revenue fell short of expectations. Data from Eurostat released on Thursday showed that Eurozone monthly retail sales fell more than expected in April as higher energy prices continued to erode consumers’ purchasing power, heightening concerns that the bloc’s economy could contract in the second quarter. Separately, data showed that Switzerland’s annual inflation rate held steady in May, reinforcing expectations that the Swiss National Bank is unlikely to raise interest rates later this month. In corporate news, Remy Cointreau (RCO.FP) jumped over +10% after CEO Franck Marilly outlined a turnaround strategy and said the beverage maker aims to increase operating profit by about 100 million euros ($116.1 million) by 2028/29.
Switzerland’s CPI and Eurozone’s Retail Sales data were released today.
Switzerland’s May CPI rose +0.2% m/m and +0.6% y/y, weaker than expectations of +0.3% m/m and +0.8% y/y.
Eurozone’s April Retail Sales fell -0.4% m/m and rose +1.0% y/y, compared to expectations of -0.3% m/m and +0.3% y/y.
Asian stock markets today settled in the red. China’s Shanghai Composite Index (SHCOMP) closed down -0.64%, and Japan’s Nikkei 225 Stock Index (NIK) closed down -1.36%.
China’s Shanghai Composite Index closed lower today as escalating trade tensions involving China weighed on sentiment. The Office of the U.S. Trade Representative proposed a new tariff of at least 10% on imports from 60 trading partners, including China, citing their purported failure to sufficiently address forced labor concerns. China criticized the move, saying trade disputes should be settled through dialogue and consultations. The increasingly uncertain trajectory of the Middle East peace negotiations also kept investors cautious. Metal and materials stocks led the declines on Thursday. However, the benchmark index’s losses were limited as semiconductor stocks advanced on expectations of domestic breakthroughs. The optimism was fueled by a report that Chinese AI startup DeepSeek is poised to raise about 50 billion yuan ($7.4 billion) in its first funding round from investors including Tencent Holdings and CATL. “The hopes for China’s AI expansion are increasingly pinned to progress in domestic chipmaking,” said Tilly Zhang at Gavekal Dragonomics. Coal stocks also climbed on bets that coal producers would benefit from a prolonged oil shock. Meanwhile, the People’s Bank of China said the volume of its seven-day reverse repurchase agreement operations was zero on Thursday, marking a second consecutive day without a cash injection. In corporate news, GigaDevice Semiconductor climbed over +7% after FTSE Russell announced that the stock would be included in the index provider’s China index series.
Japan’s Nikkei 225 Stock Index closed lower today, retreating from a record high amid a global selloff in technology stocks. Tech investor SoftBank Group cratered over -11% after a recent rally and was the biggest drag on the Nikkei, as rivals to OpenAI moved forward with plans for initial public offerings. Also, Broadcom’s plunge in extended U.S. trading after issuing a disappointing forecast for AI chip revenue prompted investors to sell chip-related stocks. Adding to the negative sentiment, billionaire investor Ray Dalio cautioned that the booming AI market is displaying signs of a bubble that could ultimately burst. Meanwhile, the yen strengthened against the dollar on Thursday after Bloomberg reported that Bank of Japan officials are poised to consider a quarter-point increase to the benchmark interest rate this month and see scope for another hike later this year. BOJ Governor Kazuo Ueda said on Wednesday that the central bank would need to consider raising rates if the risk of prices exceeding forecasts outweighs the risk of economic damage stemming from the Middle East conflict. Elsewhere, foreign investors sold a net 491.2 billion yen worth of Japanese stocks in the week through May 30th, snapping an eight-week streak of net buying, according to data from the Ministry of Finance. Investor focus is now squarely on Japan’s April wage data, scheduled for release on Friday, for indications that pay gains are broadening sufficiently to sustain domestic demand. The Nikkei Volatility Index, which takes into account the implied volatility of Nikkei 225 options, closed up +0.51% to 29.46.
Pre-Market U.S. Stock Movers
Broadcom (AVGO) plunged over -13% in pre-market trading after the company issued below-consensus FQ3 AI semiconductor revenue guidance.
Chip stocks slid in pre-market trading following Broadcom’s forecast miss, with Marvell Technology (MRVL) slumping more than -7% and Advanced Micro Devices (AMD) falling over -4%.
CrowdStrike Holdings (CRWD) sank more than -10% in pre-market trading as the cybersecurity firm’s Q2 revenue guidance failed to impress investors.
C3.ai (AI) rose more than +3% in pre-market trading after the AI-software company posted better-than-expected FQ4 results and issued solid FQ1 revenue guidance.
UnitedHealth Group (UNH) gained over +2% in pre-market trading after BofA upgraded the stock to Buy from Neutral with a price target of $450.
You can see more pre-market stock movers here
Today’s U.S. Earnings Spotlight: Thursday - June 4th
Ciena (CIEN), Samsara (IOT), Rubrik (RBRK), Planet Labs PBC (PL), lululemon athletica inc. (LULU), Guidewire Software (GWRE), The Cooper Companies (COO), Brown-Forman (BF.A), DocuSign (DOCU), X-Energy (XE), Argan (AGX), The Toro Company (TTC), ServiceTitan (TTAN), Wealthfront (WLTH), Quanex Building Products (NX), Caleres (CAL), Columbus McKinnon (CMCO), Zumiez (ZUMZ), Concrete Pumping Holdings (BBCP), Torrid Holdings (CURV).
On the date of publication, Oleksandr Pylypenko did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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