Nasdaq Slumps as Fed Hike Bets Hit AI Stocks

The dollar held near a two-month high as traders raised bets on a Federal Reserve rate rise later this year. The S&P 500 and Nasdaq turned sharply lower on Friday, with Nvidia and other chip stocks sliding hard after Broadcom’s results added pressure to the AI trade. The FTSE 100 closed slightly higher, helped by pharma and personal care stocks. Oil jumped on fresh Israeli strikes, while gold extended losses early on Monday.

Equities

The FTSE 100 closed 0.07% higher on Friday, outperforming many global markets despite wider risk aversion. Investors drew reassurance from Bank of England survey data showing that UK businesses expect less pricing pressure from higher energy costs than they did a month earlier. The FTSE 250 fell 1%, ending a two-week winning streak, while Halifax reported that UK house prices slipped 0.1% in May.

Late on Friday, bookmaker Evoke surged 15% after agreeing to an all-share takeover by Greek gaming group Intralot. The deal values the company at approximately £243 million. Shares in Raspberry Pi jumped 27%, making it the strongest performer in the FTSE 250, after the computing company upgraded its full-year profit outlook and sent its share price to a record high.

Pharmaceutical stocks helped support the UK market, with the sector gaining 2.1% by the close. Personal care stocks also advanced 2%, while precious metal miners fell 6% as investors reduced exposure to the sector.

In the United States, Wall Street suffered a sharp sell-off on Friday. The S&P 500 closed 2.64% lower at 7,383.74, the Nasdaq Composite fell 4.18% to 25,709.43 and the Dow Jones Industrial Average lost 1.35% to finish at 50,866.78. The decline ended a nine-week winning streak for the S&P 500 and marked the Nasdaq’s largest one-day fall since April 2025.

Technology stocks led the retreat after stronger-than-expected US employment data reduced expectations for near-term Federal Reserve rate cuts. Semiconductor shares came under particularly heavy pressure, with the Philadelphia Semiconductor Index recording its steepest daily decline since March 2020.

Nvidia closed 6.2% lower on Friday, while Intel, AMD, Micron Technology and Broadcom fell between 7.9% and 13.3%. The broad decline erased more than $1 trillion in market value across the semiconductor sector.

Lululemon Athletica dropped 8.6% after cutting its full-year profit forecast and issuing second-quarter earnings guidance below market expectations. Contact lens manufacturer Cooper Companies moved in the opposite direction, rising 8.6% after reporting second-quarter results ahead of analysts’ forecasts.

Cryptocurrency-linked shares also weakened. Coinbase fell 7.1% and Strategy lost 6.9% as Bitcoin declined 4.1% during Friday’s session.

Forex & Commodities

The US dollar held near a two-month high early on Monday after stronger US jobs figures lifted expectations that the Federal Reserve could raise interest rates again this year. Sterling fell to a three-week low against the dollar at $1.332, while the euro dropped to a two-month low at $1.151.

The Australian dollar and New Zealand dollar also weakened early on Monday, falling to two-month lows of $0.7016 and $0.5779 respectively. The yen slipped further to 160.3 per dollar, leaving it close to levels that previously prompted intervention by Japanese authorities.

Markets were pricing in a more than 70% chance of a Fed rate rise in December, up sharply from 45% a week earlier. The shift followed US non-farm payrolls data showing that the economy added 172,000 jobs in May, far ahead of expectations, with the labour market strengthening despite pressure from higher energy costs.

The Bank of Japan is expected to raise interest rates this month unless a sharper escalation in the Middle East unsettles markets. Rising fuel costs are adding to domestic price pressures in Japan, although investors are now looking for signs of whether the central bank will signal a faster pace of future rate rises.

Spot gold fell 0.4% to $4,313 early on Monday, extending Friday’s 3% drop to its lowest level since 24 March. Spot silver fell 0.4% to $67.56, platinum lost 0.5% to $1,767, while palladium was steady at $1,226.

Oil prices rose sharply on Monday after fresh Israeli strikes on Iran and renewed attacks on Lebanon. Brent crude climbed 4.47% to $97.15 a barrel, while US crude rose 4.50% to $94.61.