S&P 500 Dropped 2%, Nasdaq Plunged 4.2%; 10-Year Yield Crossed 4.5%

Barry Adams
05 Jun, 2026
New York City

Global markets retreated and showed heightened volatility as tech-heavy indices adjust to cooling AI momentum. 

Renewed hostilities in the Middle East dampened the prospect of a temporary ceasefire in the Middle East.

At the start of the week, world market averages extended gains as investors reacted to positive earnings and stayed optimistic about the prospects for AI infrastructure investing and technologies. 

However, as the week progressed, the market mood soured amid renewed hostilities in the Middle East and concerns over the AI trade. 

Wall Street indexes traded down after a volatile week amid concerns over AI-linked stock valuations following Broadcom's weaker-than-expected revenue outlook for the current quarter. 

Wall Street indexes plunged on Friday after the U.S. economy added more-than-expected jobs in May, raising the prospects that elevated borrowing costs could weigh on the economy and investment. 

The U.S. economy added about 172,000 net new jobs in May, jobless rate held at 4.3%, and the annual wage growth eased to 3.4% from 3.6% in the previous month, according to the latest update released by the U.S. Bureau of Labor Statistics.  

The change in total nonfarm payroll employment for March was revised up by 29,000, from 185,000 to 214,000, and the change for April was revised up by 64,000, from 115,000 to 179,000. 

With these revisions, employment in March and April combined is 93,000 higher than previously reported, the BLS report noted. 

European markets traded mixed amid lingering uncertainty in the Middle East, and investors digested a string of economic data confirming resilient conditions despite elevated inflationary pressures. 

Japan's Nikkei 225 Stock Average closed unchanged after a week of trading, as concerns mounted over the AI trade following Broadcom's estimate of a weaker-than-expected sales outlook. 

For the week, the Nikkei 225 Stock Average advanced 0.1%, and the TOPIX increased 0.2%, as investors reviewed a fresh batch of economic data released this week. 

In May, the Nikkei 225 Stock Average gained 11.3%, and the TOPIX increased 6.8% after investors bid up AI- and semiconductor-related stocks for the second consecutive month. 

Across exchanges in China, Hong Kong and Shanghai indexes rebounded on Friday and traded down at the end of a week, despite a rebound in enthusiasm over AI trade. 

After a week of choppy trading, the Hang Seng index decreased 1.2%, and the CSI 300 Index edged down 1.7%. 

Despite the recent run-up in China-based stocks, investors have been cautious about increasing exposure to Chinese companies amid low margins, intense competition, and poor visibility of future profits. 

India's indexes closed down 0.8%at the end of a volatile week, and the Reserve Bank of India left its benchmark rates unchanged at 5.25% for the third consecutive meeting in June. 

The central bank also lowered its fiscal year economic growth estimate to 6.6% from the previous estimate of 6.9% and revised higher its inflation estimate to 5.1% from 4.6%, mainly driven by the higher costs of imported energy products.

In May, benchmark indexes declined 3.5% as foreign investors continued to lower exposure to emerging markets amid higher yields on the U.S. Treasury notes.

Since the start of the year, the sell-off in Indian securities has intensified, particularly in stocks, according to India's NSDL. 

Foreign investors sold about $28 billion in 2026 as of the end of the first week of June, compared to about $18 billion in the comparable period in 2025, reversing the inflow of $20.7 billion in 2023. 

 

U.S. Movers

Broadcom dropped 13% to $418.91 after the advanced chipmaker's outlook fell short of some investors. 

Revenue in the fiscal second quarter ending on May 3 increased 48% to $22.2 billion from $15.0 billion, net income soared 88% to $9.3 billion from $5.0 billion, and diluted earnings per share rose 85% to $1.91 from $1.03 a year ago. 

The company's Board of Directors declared a quarterly cash dividend of 65 cents payable on June 30 to shareholders on record on June 22. 

The company guided fiscal third-quarter revenue of $29.4 billion and an adjusted operating margin of 68% of protected revenue.