The Nasdaq Composite fell 1% on June 4, extending a selloff from last week's record highs as traders weighed renewed geopolitical risks and uncertainty over the Federal Reserve's rate path. The decline follows a period where the index had surged to an all-time closing high of 26,917 on May 28, driven by optimism over a US-Iran ceasefire extension and artificial intelligence-related stocks.
The Nasdaq Composite fell 1% on June 4 to extend a selloff from last week's record highs as traders weighed renewed geopolitical risks and uncertainty over the Federal Reserve's rate path.
"The economy is still expanding, but hotter inflation limits the Fed's flexibility and pushes rate cuts further out," Gina Bolvin, president of Bolvin Wealth Management Group, said. "This is a more difficult environment for investors because the growth story is cooling just as inflation is heating back up."
The decline follows a period of record highs. On May 28, the S&P 500 closed at 7,563.63 and the Nasdaq at 26,917.47, both all-time highs, after reports that the US and Iran had reached a draft agreement to extend their ceasefire for 60 days. Since then, the narrative has shifted. US forces struck an Iranian military site, and Iran's Revolutionary Guard reported targeting a US airbase in Kuwait, raising fears the ceasefire could collapse. Oil prices climbed, with WTI crude topping $91 a barrel and Brent approaching $97.
The selloff puts the Nasdaq on track to test technical support levels not seen since before the May rally. Investors are now focused on the next Federal Reserve meeting, with markets pricing in a higher probability of rate hikes before year-end after April's Personal Consumption Expenditures index showed inflation accelerated at its fastest pace in three years.
The broader market also weakened. The S&P 500 and Dow Jones Industrial Average traded lower, retreating from their May 28 closing levels of 7,563.63 and 50,668.97, respectively. Technology and software stocks, which had powered the rally to records, led the decline as traders locked in profits.
The selloff coincided with three catalysts: a resurgence in US-Iran military activity that threatened the 60-day ceasefire framework, a rise in Treasury yields with the 10-year note topping 4.5%, and profit-taking in AI-related names that had surged in late May. Snowflake, which soared 36% on May 28 after raising its annual revenue outlook and announcing a $6 billion AI infrastructure deal with Amazon Web Services, was among the decliners.
First-quarter US GDP was revised lower to a 1.6% annualized rate, while personal income was flat in April, missing forecasts for a 0.4% increase. The data suggested consumers may be feeling the strain from higher prices and borrowing costs, adding to the bearish tone.
The decline puts the Nasdaq at its lowest since the May rally began. Investors will watch for any update on the US-Iran ceasefire negotiations and the next consumer price index release for further direction on rate policy.
This article is for informational purposes only and does not constitute investment advice.
