Global stock markets slid on Friday as traders sold shares to lock in profits from recent rallies driven by artificial intelligence, snapping a multi-day winning streak.
Markets Decline Across Asia and Europe
Japan's Nikkei 225 fell 1.2% to 38,542.10, while South Korea's Kospi dropped 0.8% to 2,745.67. Hong Kong's Hang Seng Index lost 0.5% to 17,832.45, and China's Shanghai Composite slipped 0.3% to 3,012.45.
In Europe, Germany's DAX declined 0.6%, France's CAC 40 fell 0.4%, and Britain's FTSE 100 dropped 0.3% in early trading.
Profit-Taking After AI-Driven Gains
The sell-off followed a strong rally earlier this week, fueled by optimism over artificial intelligence. The S&P 500 had risen 1.5% on Wednesday after a major tech company announced a new AI chip. However, analysts said the pullback was expected as investors locked in gains.
"It's a classic case of profit-taking after a sharp run-up," said Michael O'Rourke, chief market strategist at JonesTrading. "The AI theme is still strong, but markets need to consolidate before moving higher."
Impact on Tech Stocks
Technology stocks led the decline, with the Nasdaq Composite falling 0.9% on Thursday. Shares of AI-related companies such as Nvidia and Microsoft each dropped about 1% in premarket trading Friday.
According to data from FactSet, the technology sector of the S&P 500 has risen 18% this year, driven by AI enthusiasm. The pullback trimmed some of those gains but still left the sector up 16% year-to-date.
Broader Economic Concerns
Investors also weighed economic data showing mixed signals. The U.S. Commerce Department reported that durable goods orders rose 0.2% in May, below expectations of 0.5%. Meanwhile, jobless claims held steady at 210,000, indicating a still-tight labor market.
"The economy is showing signs of slowing, but not enough to derail the AI narrative," said Sarah Johnson, an economist at Capital Economics. "The profit-taking is healthy and sets the stage for a more sustainable rally."
Outlook for Next Week
Markets will focus on upcoming earnings reports from major tech companies, including Apple and Amazon, due next week. The Federal Reserve's preferred inflation gauge, the core PCE price index, is also scheduled for release on Friday.
"We expect volatility to remain elevated as investors digest earnings and economic data," said O'Rourke. "But the underlying trend for AI-related stocks remains positive."
