Tech Stocks Decline Following Jobs Report
Technology stocks (XLK) experienced a decline on Friday after the monthly jobs report revealed a decrease in the unemployment rate to 4.2% in August, down from 4.3% in July. This data has led some analysts to predict that the Federal Reserve may cut interest rates by 25 basis points rather than the 50 basis points previously anticipated at its upcoming policy meeting. Despite the potential for lower rates, tech stocks—normally beneficiaries of interest rate cuts—led the market decline. Investors are increasingly questioning whether capital expenditures for tech infrastructure will continue and if the AI stock boom has peaked.
Nvidia and Broadcom Lead Tech Stock Decline
Nvidia (NVDA) saw its stock fall by as much as 5% on Friday, marking the semiconductor sector as a major driver of the market sell-off during the final trading session of September’s first week. NVDA now on pace to end the shortened trading week down roughly 14%.
Broadcom (AVGO) shares also took a hit, dropping nearly 9% after its sales forecast for the fourth quarter disappointed investors. Although Broadcom beat earnings estimates, the lackluster sales forecast overshadowed its success. Orders for the company’s AI chips surged, but spending on broadband infrastructure lagged.
“Clearly, the Street wasn’t happy,” said Daniel Newman, CEO of The Futurum Group, during an interview. “They were looking for outsized numbers, but this story is also about the diversification of Broadcom’s business. The core business has slowed, but there are favorable conditions for recovery over the next few quarters.”
Tech Stocks Decline – ASML and Semiconductor Sector Impact
ASML (ASML) shares also fell by 5% on Friday after the Dutch government imposed new export controls on advanced chip manufacturing equipment, citing national security concerns.
This move is expected to impact ASML’s ability to export to key markets. In addition, Morgan Stanley removed ASML from its “Top Pick” list for European semiconductors and slightly lowered its price target, adding further pressure to the stock.
Rate Cut Expectations and Investor Sentiment
The jobs report has sparked further uncertainty about the Federal Reserve’s next move. Many tech investors had been hoping for more aggressive rate cuts, which tend to benefit high-growth sectors like technology. However, the lowered expectations for a 50-basis-point cut have left investors feeling cautious.
“They’re not going to get the support they were looking for from the Fed,” noted Peter Tchir, head of Macro Strategy at Academy Securities. “There are still questions about capital spending, and while the economy is okay, it’s not great.”
The tech sector’s reaction to the latest economic data reflects broader concerns about the sustainability of growth in the face of weakening demand and geopolitical tensions. As the Federal Reserve prepares for its next policy meeting, the market will continue to closely monitor economic indicators and corporate earnings for further clues about the direction of interest rates and capital expenditures in the tech space.
Chart by Trading View
