Here are 3 forces that drove a whirlwind week for the stock market
An avalanche of selling on Friday crushed the stock market, a dramatic reversal from record highs earlier in the week. Chip stocks nosedived in the final trading session of last week. There were pockets of weakness in tech ever since Club name Broadcom disappointed on earnings. However, the sell-off on Friday was next-level after a strong jobs report dashed hopes of a Federal Reserve interest rate cut and sent the 10-year bond yield soaring above 4.5%. The S & P 500 and Nasdaq plunged 2.6% and 4.2%, respectively, on Friday, making Tuesday’s record-high closes seem like a distant memory. The massive rotation out of tech into lagging sectors like health care and financials did produce some winners for us. For the week, Eli Lilly rose 2.4%, and Wells Fargo gained 5.7%. When it was all said and done, the weekly losses in the S & P 500 and Nasdaq mirrored Friday’s declines. The S & P 500 snapped a nine-week winning streak. Here is a closer look at what drove the market action last week, starting with the sky-high earnings expectations for Broadcom and two other Club tech names that went unmet. Hot stocks into earnings It started on Wednesday, when Palo Alto Networks shares sank despite delivering a strong beat-and-raise quarter the prior evening. The stock came into the print hot after setting a new record high on Monday. When management reiterated its long-term financial outlook, instead of raising it, the sellers drove the stock down by 5.6%. It didn’t change our view on Palo Alto. We love that management finally showed Wall Street that AI can accelerate its business. That is huge considering how badly cyber stocks had sold off earlier in the year on what Jim Cramer said all along were unfounded disruption concerns. For the week, Palo Alto fell 3.4%. A similar story played out when CrowdStrike reported better-than-expected earnings and forward guidance on Wednesday evening. The stock was down more than 10% during Thursday’s session but closed down less than 4%. Like Palo Alto, CrowdStrike’s weakness can be pinned on falling short of lofty expectations amid near-record-high shares. We were not discouraged . CrowdStrike also showed us that AI is a boon to business. CEO George Kurtz said so himself on the conference call. Unfortunately, CrowdStrike sold off further on Friday, losing more than 8% for the week. But the biggest downer was Broadcom, whose stock fell 12.6% after earnings on Thursday. The price action here might be a little more understandable because it wasn’t just a failure to issue even stronger guidance; it was also a lower-than-expected revenue number in the reported quarter. The AI-related parts of its business were strong. We were also encouraged by management’s forecasting of continued AI semiconductor revenue growth in fiscal 2028. That was not nearly enough to save the stock. Selling continued on Friday, and Broadcom was our worst stock of the week, down 13.7%. The weekly losses in Intel, our newest chip stock, were neck-and-neck with Broadcom. Intel lost 13.5% on the week. We started a position on Wednesday and bought more shares into the decline on Friday. We got into Intel because of its strong central processing unit (CPU) business, which is well-positioned for the agentic AI era. In data center server racks, the ratio of CPUs to GPUs is narrowing. GPUs are graphics processing units, with Nvidia dominating the market. Kingmaker Nvidia Nvidia was down a much more modest 2.9% for the week. At the influential Computex conference in Taiwan on Monday, CEO Jensen Huang announced that Nvidia is entering the personal computer market, with chips based on Arm Holdings’ architecture. Shares of Arm , which is also a Club name, soared 15.7% on the news. However, it was not immune to the selling in chip stocks. Arm shares lost 3% on the week. Arm has been an incredible position for us; shares are still up 213% year to date. There was one big chip-stock winner amid all the carnage. Shares of Marvell Technology gained more than 28% last week. On Tuesday, Jensen predicted that Marvell would be the “next trillion-dollar company.” Before those comments, which sent the stock rocketing higher, Marvell had a market cap of nearly $200 billion. Jim said the sharp rally in Marvell shares was concerning. “These are big moves, and they’re not based on anything other than one person saying it.” Still, Jim remains bullish on Marvell, which is not a Club stock. IPOs and stock sales The other big story of the week, which will carry into next week and beyond, is the deluge of stock expected to hit the market from three massive IPOs. The first one is SpaceX, which is set to start trading this coming Friday. Elon Musk’s satellite, rocket, and AI company disclosed plans last Wednesday to sell 555.6 million shares at a fixed price of $135 each, raising roughly $75 billion at a $1.8 trillion market value. SpaceX is just one of several high-profile IPOs. Anthropic, known for its family of large language models called Claude, confidentially filed its IPO prospectus on Monday. The deal could create a historic share sale for investors ready to jump into AI, as Anthropic recently closed a funding round that valued the startup at $965 billion. The news put Anthropic ahead of rival OpenAI, which is readying plans for a public market listing. The startup was recently valued at a $852 billion post-money. Companies aren’t just raising capital through IPOs. Last week, Alphabet announced plans to sell $85 billion in stock to secure more funding for its AI buildout. Shares of the Google parent fell almost 4% Tuesday on the news and lost 3% on the week. Investors don’t typically like it when companies sell stock to fund investments because it can dilute their existing stakes. The move raised questions about whether other megacaps will do the same. Club stock Meta Platforms sank on Friday after the Financial Times reported that the company could potentially raise tens of billions of dollars in a stock offering to help fund its AI push. Meta lost more than 6% for the week. Jim issued a warning about all these deals, saying that a massive increase in stock supply could create a near-term headwind for the market. The string of big tech IPOs and stock sales could prompt investors to sell existing holdings to raise cash and buy shares elsewhere. “Bull markets can be killed by business conditions or interest rates or geopolitical turmoil, but the thing that most easily leads them to the slaughterhouse is an excess of new supply,” he said during “Mad Money” on Wednesday. “Like any market, when supply outstrips demand, prices go right down.” Jim continued, “I get concerned that stock supply will overwhelm investor demand. Right now, looking at the calendar, I don’t know how we are going to afford all of these deals without taking the market lower. It’s too much capital at once.” (See here for a full list of the stocks in Jim Cramer’s Charitable Trust.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. 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