Nasdaq's worst drop in a year exposed the fragility of a market priced for perfection; With chips reeling and rate fears revived, Apple's WWDC is now the AI trade's next defining moment.
The Nasdaq 100 Index (NDX) experienced its worst single day decline in about a year on Friday as a much stronger-than-expected May job growth dampened risk sentiment. High-flying mega-cap artificial intelligence (AI)-levered stocks paced the decline, with the negativity set in motion by Broadcom’s (AVGO) earnings aggravated by rate hike fears.
The pullback appears to have presented traders with a buying opportunity. NDX climbed more than 2% by mid-day in New York.
Taking Stock of Friday Carnage
The Nasdaq 100 Index shed a whopping 1,450 points or 4.77% before closing at 28,957.60, marking the lowest close since May 7. Friday’s loss was the steepest so far in 2026. The session will be remembered for its rate shock sell-off that dented a market that had been priced for perfection.
Morgan Stanley Equity Strategist Michael Wilson explained the sell-off as one led by semiconductor and memory stocks, where sharp year-to-date gains met crowded positioning across hedge funds and levered exchange-traded funds (ETFs). Dealer positioning amplified the downside, he added.
Friday’s job numbers shattered all hopes of Federal Reserve rate cuts that would have made future earnings worth more today, and in turn justified the lofty multiples of many high-profile tech names. When the economy added 172,000 jobs as opposed to expectations for 85,000, it was a signal that the economy was too hot for rate cuts, possibly hot enough for rate hikes. For stocks priced for perfection, Friday’s data was not just a setback but a trigger for a valuation reset.
Many AI levered names trade at lofty multiples, and rising yields would render distant future earrings worth far less in today’s dollars. The benchmark 10-year Treasury yield punched through the 4.5% threshold on Friday and has held above it into Monday, a level that has historically acted as a pressure point for growth and tech valuations.
Yield Squeezing Tech Multiples
Source: Trading Economics
This is the primary reason why the NDX fell far more than the 30-stock blue-chip Dow Jones Industrial Average (down 1.35%). The latter is heavily weighted with financial and industrial names.
Nvidia’s Jensen Soothes Fears
As the sell-off hangover lifts, traders drew encouragement from AI frontrunner Nvidia’s CEO Jensen Huang’s comments made during his visit to South Korea. Speaking to the press, the tech entrepreneur said, "We're at the beginning of it, and whatever happened to the stock market, you should be very happy because now you can buy at a discount.”
With Jensen Huang's bullish remarks offering a floor of confidence for rattled investors, the AI trade appears far from over. It’s simply pausing to catch its breath. F
Yet the market's gaze is already shifting westward. As the dust settles on Nvidia's moment in the spotlight, all eyes now turn to Cupertino, where Apple's annual software-focused Worldwide Developers Conference (WWDC) gets underway.
Apple’s WWDC Headline Tech Events of Week
The catalytic event promises to be the next major litmus test for Big Tech sentiment. With AI integration expected to take center stage, WWDC could either reinforce the optimism Huang sparked or introduce an entirely new set of questions for traders to wrestle with.
Tech giant Apple is widely expected to unveil its much-awaited AI-enabled Siri at the event. Deepwater Asset Management analyst Gene Munster said the task is cut out for Apple now. “The waiting is over, and now it’s time for Apple to convince investors that future products will be infused with compelling AI features that only Apple can pull off.”
“If they do that, the AI narrative on AAPL will flip from follower to leader, and shares should undergo a measurable re-rating.”
The verdict from Cupertino this week may well determine whether Big Tech's AI narrative broadens into a new chapter, or stalls at the edge of one.
NDX In Bullish Alignment Despite Sell-off
The weekly chart tells a story of a market that ran hard and fast, and is now digesting the excess. The NDX surged from the April low near 23,007 to a peak above 31,000 in under two months, a near 35% vertical move that left little technical base beneath it. Friday's 4.77% drop was the first serious test of that rally's integrity.
Source: TradingView
The index is currently trading around 29,686, sitting at the 20-day SMA at 29,686, a level it must defend on a closing basis. Immediate support comes in at 28,917, followed by the more substantial 28,060 zone. A breach of the latter would open the door to a deeper retracement toward the 50-day SMA at 27,567, which aligns with a broader consolidation area from the April breakout.
On the upside, resistance stacks up at 29,779, then 30,100, the zone from which Friday's selloff was initiated.
Notably, all four major moving averages, namely the 20, 50, 100, and 200-day SMAs, remain in a bullish alignment well below price, confirming the broader uptrend is structurally intact despite the short-term turbulence.
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