Australian investors awoke to significant declines in US equities after Friday’s close (Saturday AEST), with the tech-heavy Nasdaq Composite plummeting over four per cent. The S&P 500 fell 2.6 per cent, and the Dow Jones Industrial Average lost 1.4 per cent. This market dip was largely attributed to May’s US payrolls data, which came in far stronger than anticipated, bolstering the case for an interest rate rise. The economy added a robust 172,000 jobs last month, significantly exceeding expectations, while the jobless rate held steady at 4.3 per cent. Gold also slumped and volatility spiked higher.
The technology sector bore the brunt of the selling wave, with the information technology sector declining 5.8 per cent and the Philadelphia semiconductor index closing down 10.3 per cent. High-flying tech companies such as Marvell Technology, Micron Technology, Arm Holdings, and Intel saw substantial losses. The “Magnificent Seven” — including Tesla, Nvidia, and Meta Platforms — each dropped sharply. A reported surge in demand for shares in SpaceX, an aerospace manufacturer and space transportation services company, ahead of its trading debut, was also linked to the selling pressure in some of these tech giants.
Market strategists offered varied perspectives on the downturn. Creative Planning’s chief market strategist Charlie Bilello noted that “downside volatility is the price of admission for investors,” advocating for embracing such risk. Conversely, John Flood, head of Americas equities execution services at Goldman Sachs, viewed the sell-off as a buying opportunity, citing historical trends where S&P 500 pullbacks have paid off. While the S&P 500 snapped its nine-week winning streak, the benchmark remains up about eight per cent year-to-date. Economists remain mixed on how Federal Reserve policymakers will interpret the strong jobs data ahead of their upcoming meeting, with views ranging from concerns about cyclical overheating to acknowledgments of vigorous employment increases.
