Wall St Plunges as Treasury Yields Rise, Broadcom Warns of AI Margin Risks

U.S. stocks declined on Friday, with the S&P 500 and the Nasdaq reaching their lowest levels in more than two weeks. This downturn occurred as Treasury yields rose following hawkish comments from several Federal Reserve policymakers concerned about persistent inflation. Their remarks suggested that lower borrowing costs might not be warranted yet.

The market’s reaction came ahead of key reports from the Labor Department, scheduled for next week, which will detail non-farm payrolls and consumer inflation for November. These figures are anticipated to provide further insights into the health of the economy.

In a notable development, Broadcom (AVGO.O) reported concerns about future margins, leading to an 11% drop in its shares. This raised alarms regarding the profitability of investments driven by the surging interest in artificial intelligence (AI). David Morrison, senior market analyst at Trade Nation, commented, “Given the fact that ‘Big Tech’ has been at the vanguard of the rally since October 2022, there’s a danger that it may become the catalyst for broad-based selling.”

Other semiconductor stocks also faced declines, with Nvidia (NVDA.O) falling 2.8%, contributing to a broader loss of 4.8% in the chips index (.SOX). This downturn followed a disappointing forecast from Oracle (ORCL.N), whose shares dropped 5.6% after reports indicated delays in data centers for AI company OpenAI from 2027 to 2028.

Additional stocks that saw declines amid AI-related optimism included Sandisk (SNDK.O), which plummeted 13.6%, alongside infrastructure firms like CoreWeave and Oklo (OKLO.N), both of which slid by 11%.

As of 11:49 a.m. ET, the Dow Jones Industrial Average (.DJI) fell 295.81 points, or 0.61%, to 48,408.20. The S&P 500 (.SPX) lost 88.71 points, or 1.29%, reaching 6,812.29, while the Nasdaq Composite (.IXIC) dropped 451.43 points, or 1.91%, to 23,142.43.

Nine of the eleven S&P 500 sectors saw declines, with technology stocks (.SPLRCT) leading the way down, losing 2.9%. Friday’s losses erased the weekly gains previously recorded by both the S&P 500 and the Nasdaq, although the Dow (.DJI) and Russell 2000 (.RUT) retained some positive momentum after the Fed’s recent decision to trim interest rates and adopt a less hawkish outlook than anticipated.

Despite the market’s fluctuations, traders are currently pricing in a total of 50 basis points of rate cuts by the end of 2026, exceeding the Fed’s indicators from this week.

Interestingly, the greatest gains were observed in blue-chip and small-cap indexes, indicating a shift in investor focus away from mega-cap stocks. The Russell 2000 has notably outperformed the S&P 500 during much of this quarter, particularly within value-heavy sectors like healthcare (.SPXHC). However, on Friday, rising Treasury yields affected the small-cap index, which fell 1.4%.

In contrast, Lululemon Athletica shares surged 10% after the apparel company raised its annual profit forecast and announced that CEO Calvin McDonald would be leaving the firm.

Additionally, U.S.-listed shares of cannabis companies rallied following reports that President Donald Trump was considering easing marijuana restrictions through an executive order. Both Canopy Growth and Tilray Brands saw their shares jump by 30% each.

On the exchanges, declining issues outnumbered advancers by a ratio of 2.16-to-1 on the NYSE and 2.11-to-1 on the Nasdaq. The S&P 500 recorded 31 new 52-week highs and three new lows, while the Nasdaq Composite noted 106 new highs and 69 new lows.

As the market grapples with these fluctuations, the focus will likely remain on forthcoming economic indicators and how they might shape monetary policy and investor sentiment moving forward.