Stocks Drop as Chip Shares Fall and Bond Yields Rise

December 13, 2025

Market Overview

The S&P 500 Index saw a decline of 1.07% on Friday, while the Dow Jones Industrial Average dropped by 0.51%. The Nasdaq 100 Index experienced a larger fall at 1.91%. Additionally, December E-mini S&P futures decreased by 1.07%, with December E-mini NASDAQ futures falling by 1.94%.

On Friday, major stock indexes faced a sharp sell-off, with the S&P 500 hitting a near two-week low and the Dow Jones Industrial Average slipping from its record high. The downturn in technology stocks contributed heavily to this broader market decline.

Broadcom took a hit of more than 11% on Friday, dragging down chipmakers and other technology stocks after its revenue expectations failed to meet optimistic estimates. The absence of a 2026 AI revenue forecast from the company further unsettled investors. This week also saw disappointing forecasts from Oracle and Broadcom, prompting some to reassess their investments in an already high-priced tech sector. Meanwhile, a shift of some investors from tech to industrial stocks offered a measure of support to the Dow.

Comments from the Fed influenced the market Friday, pushing Treasury note yields higher. Chicago Fed President Austan Goolsby, who had disagreed with the recent rate cut, mentioned, “Most companies and consumers we’ve engaged with see prices as a significant issue and think waiting for more data might have been wiser.” This comment contributed to a rise in the 10-year T-note yield of about 3 basis points. Similarly, Kansas City Fed President Jeff Schmidt and Cleveland Fed President Beth Hammack voiced their opposition to the rate cuts, asserting that inflation is still a worry and the economy displays robust momentum.

On a different note, Philadelphia Fed President Anna Paulson expressed concerns about the labor market being weaker than expected, which adds a layer of uncertainty to inflation risks.

The market is currently assigning a 24% likelihood that the FOMC will cut the federal funds target range by 25 basis points during their next meeting set for January 27-28.

As for corporate earnings, the third-quarter season is nearly complete; 497 of the S&P 500 companies have reported. Bloomberg Intelligence noted that around 83% exceeded expectations—this quarter’s performance could be the strongest since 2021, with a year-over-year profit increase of 14.6% compared to the estimated 7.2%.

Internationally, stock markets showed mixed results on Friday. The Euro Stoxx 50 fell 0.58%, while China’s Shanghai Composite managed a recovery to finish up 0.41%. In Japan, the Nikkei index rose by 1.37%, reaching a four-week high.

Interest Rate Outlook

The March 10th T Note closed down by 9 ticks, while the 10-year T-note yield increased by 3.5 basis points, landing at 4.192%. The Fed’s hawkish comments weighed heavily on T-note prices. Goolsby suggested the Fed might have benefitted from waiting on rate cuts, alongside similar sentiments from Schmidt and Hammack regarding maintaining a “moderately restrictive” policy given ongoing inflation concerns. Amid the drop in the stock market, T-note prices were buoyed by a flight to safer assets.

T-notes are facing pressure as investors lean towards short-term government bonds instead of long-term ones. This shift comes in response to the Fed’s announcement at Wednesday’s meeting to start purchasing up to $40 billion monthly in short-term Treasury bills, aiming to enhance liquidity in the markets. Long-term Treasuries are also struggling under inflation apprehensions and worries about the Fed’s independence.

European government bond yields rose, with Germany’s 10-year bonds up by 1.4 basis points to 2.857%, and the UK’s 10-year yield up 3.3 basis points to 4.517%.

In the UK, manufacturing production saw a month-on-month increase of 0.5% in October, though this fell short of expectations of 1.1%.

In swaps, there remains a 0% probability that the ECB will lower interest rates by 25 basis points during its upcoming meeting on December 18.

Sector Highlights

Broadcom led a decline among chip stocks, dropping over 11% after missing revenue projections and failing to provide a forecast for AI revenue in 2026. Other notable declines included Micron Technology down more than 6%, with Marvell Technology and Lam Research also falling over 5%. KLA Corp, AMD, and Applied Materials saw declines of more than 4%, with Intel, Nvidia, ASML, GlobalFoundries, and ARM Holdings all dropping over 3%.

Stocks linked to AI also suffered after the disappointing news from Broadcom, with Vertiv Holdings down over 9% and Amphenol and Constellation Energy both seeing declines of over 7%. Eaton Corporation fell more than 5%, while GE Vernova dropped over 4%.

In the cryptocurrency market, Bitcoin dipped more than 3%, with Galaxy Digital Holdings down over 10%. Other affected companies included Riot Platforms and MARA Holdings, both closing down over 2%, with Coinbase Global slipping by 0.58%.

SanDisk suffered the largest drop on the S&P 500, plunging over 14% after GF Securities downgraded its rating. Netskope closed over 11% lower following a reported third-quarter loss and dismal outlook for the full year. Ciena Corp saw a decline of over 9% after being downgraded by Northland Securities. Roblox ended the day down more than 6% after JPMorgan Chase downgraded its stock.

Veeva Systems fell over 2% after KeyBanc Capital Markets moved its rating from Overweight to Sector Weight. In more positive news, Lululemon Athletica reported a Q3 EPS of $2.59, exceeding expectations and raising its 2026 EPS forecast. Quanex Building Products posted an adjusted EPS of 83 cents, well above the anticipated 52 cents, resulting in a gain of over 9%. General Electric closed up by more than 3% after Citigroup began coverage with a buy recommendation. Linde Plc also gained over 3% following Citigroup’s recommendation of it as a top stock.

Bristol-Myers Squibb saw an increase of more than 2% after Guggenheim upgraded its rating, while Allegiant Travel finished with a gain of over 1% following an upgrade from Deutsche Bank.