Nasdaq 100: Tech Earnings Misses, Cooling Inflation, and China Tensions Shape Forecast

Nasdaq Drops as Tech Stumbles; Traders Brace for June Policy Risks

U.S. stocks slipped Friday, with the Nasdaq falling 0.78% and the S&P 500 down 0.46% as traders locked in gains after a strong month. The Dow eased 0.16%. All three indexes are still on track for solid May gains, but caution is building as attention turns to June’s policy risks and economic signals.

President Trump’s accusation that China violated a recent trade pact briefly unsettled sentiment, but market focus quickly turned to inflation data and the Fed’s potential next move.

PCE Inflation Softens, Supporting Rate Cut Expectations

The core personal consumption expenditures (PCE) index rose 2.1% year-over-year in April, just under the 2.2% forecast and aligning with the Fed’s 2% inflation goal. Consumer spending edged up slightly, reinforcing a picture of restrained inflation without overheating demand.

The University of Michigan’s sentiment index came in at 52.2—flat from April but above mid-month levels. Importantly, inflation expectations fell: one-year projections dipped to 6.6% and five-year expectations dropped to 4.2%, the first decline since December. The data supports a growing belief that the Fed may cut rates later this year, with traders increasingly pricing in action by September.

Retail Results Shake Up the Tape: Ulta and Costco Surge, Gap Tanks

Retail earnings created sharp divergences. Ulta Beauty jumped 13% to a 52-week high after lifting its full-year profit outlook and topping Q1 estimates. Strong demand and better inventory controls were key drivers. Costco rose over 3% after an 8% increase in sales and a solid fiscal Q3 beat.

In contrast, Gap plunged 20% after projecting flat sales for the current quarter—missing expectations for modest growth. The cautious outlook overshadowed better-than-expected earnings and revenue.

Tech Stocks Retreat as Elastic, Marvell, PagerDuty Weigh on Nasdaq

Technology stocks reversed some of May’s strong gains. Elastic NV dropped 12% on weak full-year revenue guidance, while Marvell Technology slid 6% despite topping EPS estimates. PagerDuty fell 11% after forecasting softer Q2 earnings.

Regeneron tumbled 18% after mixed results from a late-stage drug trial, dragging Sanofi down 5.6% as well. Nvidia and other chip names also came under pressure, contributing to the Nasdaq’s decline.

Palantir and Zscaler Buck the Trend with Strong Gains

Not all tech was weak. Zscaler surged 8% after beating Q3 estimates on both revenue and earnings. Palantir climbed more than 5% following a report that the U.S. government expanded its use of the company’s software—reigniting bullish sentiment on its federal business segment.

June Outlook: Tariff Ruling and Fed Clarity in Focus

Looking ahead, markets will be sensitive to two catalysts: a federal appeals court ruling on suspended China tariffs and upcoming Fed commentary. These could reset expectations for both trade policy and rates.

With May closing on strong footing, traders are watching for confirmation that inflation is cooling and that earnings can hold up under macro pressure. June opens with momentum—but risk sentiment remains data-dependent.

More Information in our Economic Calendar.