U.S. stock futures indicated a weaker opening on Friday, with technology stocks expected to remain under pressure following renewed concerns over valuations and growth expectations in the semiconductor sector.
The negative tone was particularly evident in Nasdaq 100 futures, which declined 1.3%, signaling potential weakness among large-cap technology names at the opening bell.
Chip Stocks Continue to Weigh on Sentiment
Selling pressure in semiconductor stocks remained a key focus after investors reacted negatively to Broadcom’s (NASDAQ:AVGO) latest outlook.
Although the company delivered quarterly results ahead of expectations, its guidance failed to satisfy investors accustomed to increasingly ambitious projections tied to artificial intelligence demand.
Daniela Hathorn, Senior Market Analyst at Capital.com, said: “The market is no longer asking whether AI demand is strong, that has largely been established.”
She added: “Instead, investors are beginning to question how much of that growth is already reflected in valuations.”
According to Hathorn, “In that sense, Broadcom’s results may not have been disappointing, but they were perhaps not enough to justify another leg higher immediately after such a powerful rally.”
Strong Jobs Data Raises Interest Rate Concerns
Futures extended their losses after the release of the latest U.S. employment report, which showed job creation significantly exceeding market expectations in May.
The Labor Department reported that nonfarm payrolls increased by 172,000 positions during the month, following an upwardly revised gain of 179,000 jobs in April.
Economists had forecast an increase of 85,000 jobs, compared with the originally reported gain of 115,000 in the prior month.
The stronger-than-expected labor market data pushed Treasury yields higher as investors reassessed the likelihood that the Federal Reserve could maintain elevated interest rates for longer than previously anticipated.
Dow Reaches New Record Despite Tech Weakness
Despite technology sector headwinds, U.S. equities finished mostly higher on Thursday.
The Dow Jones Industrial Average led the gains, rising 874.86 points, or 1.7%, to close at a record 51,561.93.
The S&P 500 advanced 30.63 points, or 0.4%, ending at 7,584.31.
Meanwhile, the Nasdaq Composite lagged behind its peers, slipping 23.02 points, or 0.1%, to finish at 26,830.98.
UnitedHealth Drives Dow Higher
A major contributor to the Dow’s strong performance was UnitedHealth (NYSE:UNH), whose shares jumped 5.2%.
The rally followed an upgrade from Bank of America, which raised its recommendation on the health insurer to Buy from Neutral.
Other Dow components also posted solid gains, including American Express (NYSE:AXP), Goldman Sachs (NYSE:GS) and Merck (NYSE:MRK).
Broadcom Sell-Off Hits Technology Stocks
Technology shares remained under pressure throughout Thursday’s session, largely because of Broadcom’s sharp decline.
The semiconductor company fell 12.6% despite reporting fiscal second-quarter earnings that exceeded analyst forecasts.
Investors appeared disappointed that Chief Executive Officer Hock Tan did not increase the company’s projection for annual AI-related chip sales, which remains at $100 billion.
AJ Bell Head of Markets Dan Coatsworth commented: “Broadcom may have emerged as a key player in the booming AI infrastructure market, with a particular expertise in the custom chips increasingly being used by the likes of Alphabet and Meta.”
He added: “However, just like its rival Nvidia, Broadcom is finding that meeting and even slightly beating forecasts is not enough when the market is holding it to such a high standard.”
Financial and Healthcare Shares Outperform
While technology struggled, several other sectors posted strong gains.
Banking stocks rallied sharply, lifting the KBW Bank Index by 3.7% to its highest closing level in nearly four months.
Healthcare and pharmaceutical shares also performed strongly, with the NYSE Arca Pharmaceutical Index rising 3.5% and the Dow Jones U.S. Health Care Index advancing 3%.
Brokerage firms, biotechnology companies and commercial real estate stocks also finished higher, helping offset weakness in semiconductor and computer hardware shares.
UnitedHealth Group stock price