Stay informed with free updates

Simply sign up to the US equities myFT Digest — delivered directly to your inbox.

Nvidia’s share price plunged by 10 per cent on Friday, helping to seal the worst run for US stock markets since October 2022, as investors shunned risky assets ahead of a flurry of Big Tech earnings next week.

The chipmaker endured its worst session since March 2020, losing more than $200bn of its market value on the day. The decline accounted for roughly half of the 0.9 per cent fall in Wall Street’s S&P 500, according to Bloomberg data.

Netflix, meanwhile, shed about 9 per cent a day after the streaming service’s announcement that it would stop regularly disclosing its subscriber numbers overshadowed stronger than expected earnings. The tech-heavy Nasdaq Composite ended the session down 2.1 per cent.

Stocks that have been powered higher by investor enthusiasm for artificial intelligence also suffered, with Advanced Micro Devices, Micron Technology and Meta closing 5.4 per cent, 4.6 per cent and 4.1 per cent lower, respectively. Super Micro Computer, a server equipment group seen as a beneficiary of the AI boom, closed down 23 per cent.

“It’s a rough day for tech stocks,” said Kevin Gordon, a senior investment strategist at Charles Schwab. “Anything that was doing well earlier this year is unwinding, but banks and energy are doing well with [defensive] staples.” 

Friday’s moves come as investors have begun to take seriously the possibility that the US Federal Reserve could make just one quarter-point cut to interest rates this year, or perhaps none at all. Retaliatory strikes between Iran and Israel have also ratcheted up investor anxiety, denting the market rally.

But analysts said Friday’s sell-off was instead being driven by investors hurriedly repositioning their portfolios ahead of a flurry of Big Tech earnings next week. 

“The stock pullback has very little to do with [interest] rates,” said Parag Thatte, a strategist at Deutsche Bank. “It’s more to do with investors pricing in slower earnings growth [for Big Tech].”

Andrew Brenner, head of international fixed income at NatAlliance Securities, said “there is no relative pressure on rates” in the absence of fresh announcements from the Fed. “But equities are getting crushed.”

Microsoft, Alphabet and Meta all report results for the first quarter next week, while Nvidia’s results are due in late May. Although all are expected to have performed well, they face tough quarter-on-quarter comparisons.

Year-on-year earnings per share growth for Nvidia, Meta, Microsoft, Amazon, Alphabet and Apple peaked at 68.2 per cent in the fourth quarter of 2023. UBS analysts expect the so-called Big 6 to report EPS growth of 42.1 per cent for the first three months of this year.

Wall Street’s benchmark S&P 500 index shed 0.9 per cent on Friday, capping its worst week in more than five months in percentage terms. The index has declined every day since last Friday, its worst run in a year and a half.

All of a sudden, “the dip-buyers are not dip-buying . . . or if they are, they are getting swamped”, said Mike Zigmont, head of trading at Harvest Volatility Management.

The dollar index was steady on the day while oil prices rose modestly.

You’re reading the Consider This newsletter, which unpacks one major news story each day. Subscribe here to get it delivered to your inbox, and listen to more from the Consider This podcast.

(L-R) Kirsten Dunst, Cailee Spaeny

Murray Close/A24

hide caption

Advertisement

toggle caption

Murray Close/A24

(L-R) Kirsten Dunst, Cailee Spaeny

Murray Close/A24

1. A civil war for the silver screen

Civil War, the new A24 film from British director Alex Garland, imagines a scenario that might not seem so far-fetched to some; a contemporary civil war breaking out in the United States.

In this world, the U.S. has split into various factions. The president, played by Nick Offerman – has given himself a third term, and he’s hoping to fend off an assault from one of the more powerful groups.

In what might seem like the most unbelievable narrative twist, California and Texas form an alliance to become the “Western Forces” and fight against Offerman’s regime. Sure, I guess!

2. How far are we from reality?

NPR movie critic Bob Mondello says the movie doesn’t do a lot of explaining to help us understand how the U.S. got to this moment. But he says that makes it stronger.

“What became much more interesting in the moment was what it looks like to transpose things that we’ve always associated with other countries – the bombed out helicopters and things like that – to place that in a J.C. Penney parking lot.”

And while the film has taken heat for little mention of politics, the question of an actual civil war has everything to do with it.

Polling has shown a significant minority thinks a civil war is at least somewhat likely in the next 10 years. So what do the experts say?

3. Division in the U.S.

Amy Cooter is a director of research at the Center on Terrorism, Extremism, and Counterterrorism at the Middlebury Institute of International Studies. Her work has led her to the question that Garland’s movie has put in the minds of both moviegoers and political pundits: Could a second civil war really happen here?

Cooter wants to make one thing clear: “I don’t think that civil war is imminent, but I think there are some people who wish we would have one, and wish that they could be effectively culture soldiers to re-enact a civil order that they see as better for them and their families.”

In her studies of militias and political extremists, Cooter has observed a movement of groups similar to those who joined in on the January 6th riots who feel disconnected from the current political moment, or perhaps want to return to a previous version of society, that they feel served them better.

And while Cooter doesn’t think a civil war will be happening anytime soon, she does say this:

“I think we are at a moment of extreme political division that may get worse before it gets better.”

This episode was produced by Marc Rivers.

It was edited by Jeanette Woods, Jonaki Mehta and Courtney Dorning. Our executive producer is Sami Yenigun.

Unlock the Editor’s Digest for free

Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.

Mysterious wreckages photographed in Iraq have given the clearest indication yet of how Israel might have launched its counterstrike against Iran.

The pictures, scoured by military analysts and open-source intelligence enthusiasts, suggest that Israel may have used an air-launched Sparrow ballistic missile to demonstrate to Tehran that it can successfully attack targets inside the country at range.

One Israeli official also indicated that the country’s armed forces used a stand-off missile attack launched far from Iran’s borders. “Israel has informed its partners that the primary attack vectors were airborne, with no entry into (Iranian) airspace,” the official said.

The exact combination of arms used in the counterstrike remains unclear, but it comes a week after Iran launched an unprecedented drone and missile salvo at Israel, itself a response to a suspected Israeli strike against Iran’s consulate in Damascus.

The missile segments, photographed and posted on social media by Sabereen News, an outlet linked to Iraqi Shia militias, were identified by some experts as most likely being the expended fuel propulsion units of Israeli-made Blue Sparrow missiles. Early Pentagon assessments pointed in the same direction, according to one person briefed on the work.

The Sparrow family of air-launched missiles have a range of up to 2,000km and could have been fired by Israeli fighter jets refuelled by tanker planes in Syrian airspace, according to OSINT analysts citing air flight data from late on Thursday.

Buttressing that theory, Syria’s Sana state news agency reported that Israeli missiles had targeted air defence positions in its southern region. Such a move would fit with Israel “clearing the air corridor in Syria for a stand-off strike on Iran”, said one former senior US defence official.

Opening a safe air raid corridor in Syria would in turn enable long-range attacks by Israeli fighter jets well outside Iranian airspace. As the Israeli missiles then flew east over Iraq, they would have jettisoned their fuel booster units, with the armed sections carrying on to their targets in Iran.

Israel has not commented on the strike, as per its traditional policy of strategic ambiguity. The US has said it played no role. The International Atomic Energy Agency also said none of Iran’s nuclear sites were damaged.

Iran has meanwhile downplayed what happened, with officials signalling there are no plans to respond. One Iranian official told the Financial Times that a limited number of missiles were part of the attack but said they were intercepted.

“There is a lot of uncertainty still,” said John Ridge, an OSINT analyst. “But Sparrow missiles most closely fit the mission parameters . . .[especially] of range.”

Sparrow missiles have three variants: the short-range Black Arrow, and the mid-range Blue and Silver Arrow versions. Blue Sparrow missiles have “performed flawlessly in its missions so far”, according to its producer, Israeli defence company Rafael.

Ridge added that another possible weapon used by Israel may have been Rocks missiles, an air-launched precision missile similar to the Sparrow. Both are made by Israeli defence tech group Rafael.

Initial reports from Iranian state media suggested that Israel may have also used small drones or quadcopters rather than missiles for the attack. Iranian foreign minister Hossein Amirabdollahian said the “mini drones” that Israel reportedly launched at Iran “did not cause any damage or casualties”.

That may be part of a deliberate Iranian strategy to play down the impact of the Israeli strike and the effectiveness of its long-range weapons. An Israeli drone strike also fits with previous covert Israeli operations inside Iran, which on at least two occasions have used drones to target weapons facilities.

Amos Yadlin, a former Israeli air force general and military intelligence chief, said that regardless of how Israel conducted the strike on Iran, the mere fact that it took place would send a powerful message.

“What the Iranians and their proxies did with hundreds of projectiles we did with just a handful of missiles,” he said. It shows Tehran that “you’re vulnerable, we have much greater capabilities than you think”.

Commenting on the Iraqi images of the fallen missile segments, Yadlin added that they looked like parts of an “armament that has never been used before, with long-range capabilities”. 

Israel originally developed Sparrow missiles to test the effectiveness of its Arrow air defence system, which is used to down incoming ballistic missiles. Israel subsequently manufactured a variant with a live warhead. Rocks missiles are a derivative version of the Sparrow.

Noting that the Israeli attack appeared to have struck a balance between showing the country’s military strength without provoking an Iranian response, the former senior US defence official praised its “impressive execution”.

Further evidence came on Friday morning, when the Iraqi militias that photographed the expended missile segments declared on social media that they “were evidence of the great failure of the Zionist attack”.

Additional reporting by Raya Jalabi in Beirut, Mehul Srivastava in London and Felicia Schwartz in Capri

Illustration by Ian Bott and cartography by Steven Bernard