US stock markets closed with a mixed performance in early trading hours Beijing time on June 5. The Dow Jones Industrial Average surged over 870 points to reach a historic new high, while the Nasdaq Composite was dragged lower by a sharp decline in Broadcom shares. Investors rotated funds from semiconductor stocks into banking and retail shares, while continuing to monitor the latest developments in the Middle East situation.
The Dow Jones Industrial Average rose by 874.86 points, or 1.73%, to close at 51,561.93. The Nasdaq Composite fell by 23.02 points, or 0.09%, to 26,830.96. The S&P 500 index gained 30.63 points, or 0.41%, ending at 7,584.32.
UnitedHealth Group led the gains on the Dow, rising more than 5%. JPMorgan Chase and Walmart also contributed to the benchmark's advance, gaining 4% and 1% respectively. Outside of the Dow, non-tech stocks like Costco Wholesale and Eli Lilly rose more than 1% and 5% respectively.
Market observers noted a trend of capital rotation away from semiconductor stocks and into banking and retail sectors.
This sector rotation was triggered by a sell-off in Broadcom, leading investors to reduce their exposure to stocks linked to artificial intelligence. The chipmaker's stock closed down 12.6% after reporting second-quarter fiscal revenue that fell short of expectations. Chip stocks, which had previously led the market's rally to record highs, broadly declined. The VanEck Semiconductor ETF (SMH) fell nearly 2%. Arm Holdings and Micron Technology both dropped more than 5%.
Dennis Folmer, Chief Investment Officer at Montis Financial, stated: "After an amazing earnings season, the AI trade remains alive and well, but after more than two months of an incredible surge, the rally is showing signs of fatigue. Given that the stalemate in the Strait of Hormuz shows no sign of ending, and as the market gradually digests this reality and takes a breather after recent consecutive gains, we would not be surprised to see a temporary stall in the stock market."
He added that Thursday's market action "indicates the rotation is in its early stages and also reminds us that not all AI stocks are the same, with varying expectations behind each one."
This followed a down day on Wall Street where escalating tensions in the Middle East weighed on equities. Attacks between the US and Iran have intensified. Iran targeted Kuwait International Airport earlier on Wednesday, while a day prior, US Central Command stated it had successfully intercepted multiple Iranian ballistic missiles and drones and conducted "defensive strikes" on Qeshm Island in the Persian Gulf. US officials stated this was in response to Tehran's "attempted attacks."
On the economic data front Thursday, the US Labor Department reported that initial jobless claims for the week ending May 30 totaled 225,000, an increase of 13,000 from the previous week and higher than the Dow Jones consensus estimate of 215,000. This figure marks the highest level of claims since the week of February 7.
Data from the US Bureau of Labor Statistics showed first-quarter productivity rose 0.3%, below the 0.5% expectation, while unit labor costs increased 1.8%, lower than the 2.4% forecast.
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