The Russell 2000 held its gains into Thursday's close while the Philadelphia semiconductor index dropped 1.4%. After Amazon and Intel reported, Nasdaq-tracking funds fell another 2% in overnight trading, Seoul's Kospi lost more than 3% and Tokyo's Nikkei 2.1%.
Thursday's split in the U.S. stock market survived the closing bell. What happened after it suggests the selling in artificial-intelligence stocks has not finished.
The Nasdaq Composite closed down 1.38% at 26,184.73, its first decline in four sessions, led by technology shares. The S&P 500 slipped 0.30% to 7,720.39 and the Dow 0.25% to 52,342.56. The Russell 2000 index of smaller companies went the other way, rising 1.01% to 2,859.22. The gap between the Nasdaq and the Russell was about 2.4 percentage points.
The Philadelphia semiconductor index fell 1.42%. The Cboe Volatility Index rose 1.38 points to 18.58. Treasury yields fell: the 10-year closed at about 4.99%, down 5.6 basis points.
Where the damage was
The heaviest losses came from companies whose results disappointed. Alphabet closed down 12.64% at $283.82. ServiceNow fell 26.95% and Fortinet 20.09%. Caterpillar dropped 9.25%. Micron lost 4.98% and Oracle 3.45%, giving back part of Wednesday's investor-day rally.
Not everything large fell. Eli Lilly rose 6.57%, Meta Platforms 1.96% and Apple 1.48%. Microsoft ended almost flat, down 0.16%.
After the bell
Amazon and Intel reported after the close, and both slid in extended trading. By about 4:30 a.m. ET on Friday, Intel was down about 26% and Amazon about 7% from their closes. The selling spread to other chipmakers: Advanced Micro Devices was down about 7%, Broadcom about 4%, Micron about 4% and Nvidia about 3%. Oracle was down about 4.5%.
Exchange-traded funds tracking the broad market followed. The largest Nasdaq-100 fund was about 2.2% lower and the largest S&P 500 fund about 1% lower in overnight trading.
Asia took the hit
Asian markets were the first to trade on the overnight results in a full session. South Korea's Kospi fell more than 3%, Taiwan's main index about 3.2% and Japan's Nikkei 225 2.12%, to 63,290.11. Two Korean chipmakers fell more than 9% during the session before paring their losses, and Taiwan Semiconductor Manufacturing about 2%, Bloomberg reported.
Europe was calmer. The Stoxx 600 was down about 0.25% early on Friday, Germany's DAX about 0.4%, and London's FTSE 100 up about 0.3%, helped by energy shares.
Rotation or retreat?
The rotation reading: money is moving out of the most expensive AI-linked stocks and into smaller, cheaper companies, as Thursday's 2.4-point gap between the Russell 2000 and the Nasdaq shows. The S&P 500 fell only 0.3%, and the largest losses were in companies with specific disappointments.
The retreat reading: the selling began in companies that spend on AI and has now reached the suppliers of chips that spending pays for, across three continents. Two of the largest technology companies reported on Thursday night, and both fell sharply.
The reaction in Treasuries fits either story. Yields fell as stocks sold off, consistent with investors seeking safety and also with traders trimming bets on a Federal Reserve rate increase in December.
What to watch
Friday's regular-session open, especially whether Intel and Amazon hold their overnight levels; whether the Russell 2000's outperformance extends to a third session; the Employment Cost Index at 8:30 a.m. ET; and results from ExxonMobil and Chevron before the open.