U.S. equity futures traded lower ahead of Friday’s opening bell, with ongoing weakness in technology stocks expected to weigh on broader market sentiment.
The decline was led by Nasdaq 100 futures, which fell 1.3%, highlighting continued investor caution toward semiconductor and artificial intelligence-related stocks.
Broadcom Outlook Continues to Impact Chip Sector
Pressure on technology shares persisted following Thursday’s disappointing market reaction to Broadcom’s (NASDAQ:AVGO) forward guidance.
While the company exceeded earnings expectations, investors appeared unconvinced that its outlook justified the sector’s elevated valuations after months of strong gains.
Daniela Hathorn, Senior Market Analyst at Capital.com, noted: “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.”
Hathorn also remarked that “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.”
Stronger Employment Report Pushes Bond Yields Higher
Investor sentiment weakened further after the release of stronger-than-expected U.S. labor market data.
According to the Labor Department, nonfarm payrolls increased by 172,000 jobs in May following a revised gain of 179,000 in April.
Market forecasts had called for an increase of 85,000 jobs, compared with the originally reported 115,000 gain in the prior month.
The stronger reading prompted a rise in Treasury yields as traders reassessed expectations for Federal Reserve policy and the possibility that interest rates could remain elevated for an extended period.
Dow Jones Hits Record High Despite Divergent Market Performance
Thursday’s trading session produced mixed results across major U.S. indices.
The Dow Jones Industrial Average surged 874.86 points, or 1.7%, to finish at a record closing level of 51,561.93.
The S&P 500 advanced 0.4% to 7,584.31.
Meanwhile, the Nasdaq Composite slipped 0.1%, ending the session at 26,830.98 as technology stocks lagged the broader market.
UnitedHealth Leads Blue-Chip Rally
One of the strongest contributors to the Dow’s gain was UnitedHealth (NYSE:UNH), which climbed 5.2%.
The advance followed a rating upgrade from Bank of America, which raised its recommendation on the healthcare giant from Neutral to Buy.
American Express (NYSE:AXP), Goldman Sachs (NYSE:GS) and Merck (NYSE:MRK) also recorded notable gains.
Technology Sector Struggles After Broadcom Sell-Off
Technology stocks remained under pressure as Broadcom shares dropped 12.6%, despite the company’s earnings beat.
Investors were hoping management would increase its annual forecast for AI-related semiconductor sales beyond the existing $100 billion target.
AJ Bell Head of Markets Dan Coatsworth said: “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.”
Financials and Healthcare Offset Technology Weakness
While semiconductor and hardware companies struggled, several sectors posted strong gains.
Banking shares advanced significantly, lifting the KBW Bank Index 3.7% to its highest closing level in nearly four months.
Healthcare and pharmaceutical stocks also performed strongly, with the NYSE Arca Pharmaceutical Index gaining 3.5% and the Dow Jones U.S. Health Care Index rising 3%.
Additional strength came from brokerage firms, biotechnology companies and commercial real estate stocks, helping support the broader market despite ongoing weakness in technology.
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