Market Insights | US Stock Market: Chip Sector Declines + Powell's Hawkish Remarks

$S&P 500(.SPX.US) fell 224 basis points to close at 5,275, with after-hours buy orders totaling $150 million. $NASDAQ Composite Index(.IXIC.US) dropped 304 basis points to 18,257; the Russell 2000 fell 89 basis points to 1,876; and the Dow Jones declined 173 basis points to 39,669. Total trading volume across U.S. stock exchanges was 15.7 billion shares, down from the year-to-date average of 16.4 billion. The VIX surged 784 basis points to 32.52.

The sharp decline in stocks was attributed to:

1. Pressure on the semiconductor sector ($NVIDIA(NVDA.US) dropped 7% due to new export restrictions to China, with the company announcing a $5.5 billion impairment; $ASML(ASML.US) fell 5% on weaker-than-expected earnings and guidance cuts);
2. Powell’s hawkish afternoon remarks, concluding, "For now, we’re in a good place to wait for clearer signals before considering policy adjustments." Will Marshall noted that given dual mandate tensions, his comments framed policy as reactive rather than proactive, with rate cuts contingent on clear dovish signals or labor market weakness.

Despite market volatility, activity remained subdued. Holiday-thinned SPX volume plunged 38% below its 10-day average. Overall desk flow and market turnover continued to slide sharply, reflecting investor fatigue over repetitive trading narratives. Defensive sectors like telecom, REITs, and staples held firm, while semis, software, and internet lagged. Megacaps underperformed, notably $Amazon(AMZN.US) and $Meta Platforms(META.US), as cyclical concerns intensified without defensive rotation. ETFs accounted for 33% of volume (in line with recent highs). SPX top buy orders remained weak at just $2.94 million.

Our floor activity rated 4/10. Floor sales outperformed the 30-day average by 261bps at -72bps. Risk appetite was muted, with LOs and HFs modestly net sellers amid overlapping tech/macro supply.

Derivatives: Volatility saw its first weekly inflows, though May VIX futures trailed spot by ~2pts as afternoon selling accelerated. Vol desk flows stayed light, but some clients reduced index hedges post-AM expiry and added VX calls. Tomorrow’s regular expiry includes $2.6T notional ($1.2T SPX, $480B single-stock), below April 2024’s scale. Straddle-implied move: 1.70%.

Detailed market analysis below: