Nasdaq set to take another hit from rotation out of tech before quarter-end

• Nasdaq futures fell 1.2% while S&P 500 and Dow futures dropped 0.5% and 0.1% respectively, following a brutal Asian session where South Korea's Kospi plunged 5.8% and Japan's Nikkei declined 4.2%
• Apple dropped 6% on Thursday after warning higher memory costs would force price increases, while Microsoft fell nearly 4% due to rising Xbox component costs, highlighting concerns that major tech companies can no longer fund AI development from operating cash flow alone
• Core PCE inflation rose to its highest level since October 2023, reinforcing expectations for prolonged elevated interest rates, though analysts characterized the move as sector rotation rather than the beginning of a bear market

Market Summary: Tech Sector Rotation Pressures Nasdaq

Key Market Movements:

US equity futures pointed to continued weakness Friday, with Nasdaq futures down 1.2%, S&P 500 futures declining 0.5%, and Dow Jones futures falling 0.1%. This marks the Nasdaq's fifth consecutive day of losses as investors rotate out of technology stocks. Thursday's session saw the S&P 500 close nearly flat at 7,358 points while the Dow gained 0.1% to 51,921 points.

Major Companies Impacted:

Apple plunged 6% after warning that higher memory costs would force price increases across its product line. Microsoft dropped nearly 4% following Xbox price hikes due to rising component costs. Memory chipmaker Micron posted strong results earlier in the week, though the broader sector remained under pressure.

Global Market Impact:

The selloff spread internationally, with South Korea's Kospi tumbling 5.8% and Japan's Nikkei falling 4.2% overnight as semiconductor and technology stocks declined sharply. European markets also traded lower.

Market Dynamics:

Analysts characterize the movement as sector rotation rather than a bear market, with investors taking profits from tech winners and reallocating capital into industrials, healthcare, and previously overlooked sectors. The equal-weight S&P outperformed the market-cap-weighted index, suggesting broad-based market health despite tech weakness.

Economic Data:

Core PCE inflation, the Federal Reserve's preferred gauge, rose to its highest level since October 2023, reinforcing expectations for prolonged elevated interest rates.

Other Assets:

Bitcoin recovered above $60,000 after briefly dipping below $59,000. Oil prices remained volatile amid Middle East tensions and OPEC+ production uncertainty.