Dow Sets New Record, Rotation Out of Chip Stocks Pressures Nasdaq
Wall Street rebounded sharply on Thursday (June 4), with the Dow Jones Industrial Average soaring to a new closing record as investors appeared to be rotating out of chip stocks and into non-tech companies. The Dow rose 874.86 points (1.73%) to close at 51,561.93, while the S&P 500 gained 0.41% to 7,584.31. The Nasdaq, on the other hand, lagged, falling slightly by 0.09% to 26,830.96.
The Dow's gains were led by defensive and value stocks, which are heavily weighted in the index. UnitedHealth rose more than 5%, while JPMorgan rallied about 3% and Walmart rose nearly 1%. Outside the Dow, rotation was also seen in non-tech names such as Costco, which rose more than 1%, and Eli Lilly, which surged more than 4%.
This rotation was triggered by a sharp sell-off in semiconductor stocks, particularly after Broadcom plunged more than 12% after reporting disappointing quarterly earnings. Broadcom's weakness prompted investors to cut exposure to AI-related stocks, triggering a broad-based decline in the chip sector, which had previously been a driving force behind the market rally.
The pressure in semiconductors was widespread. The VanEck Semiconductor ETF (SMH) fell more than 1%, Arm weakened more than 4%, and Micron fell nearly 8%. This movement signals that the market is beginning to differentiate valuations and expectations among AI stocks, shifting focus to sectors perceived as safer amid heightened volatility.
This reversal occurred after Wall Street was pressured in the previous session by escalating Middle East tensions. Attacks between the US and Iran escalated, including reports of Iran attacking Kuwait's international airport, while CENTCOM said US forces thwarted Iranian missiles and drones and conducted a "self-defense" attack on Qeshm Island. The combination of heightened geopolitics and the risk of energy inflation has made the market more selective, driving a rotation from chips to more defensive non-tech stocks. (Arl)
Source: Newsmaker.id
