【Creative News reporter Chen Yaqi / compiled report】 The U.S. May non-farm payroll report released recently significantly exceeded market expectations, instantly cooling the optimistic sentiment that had anticipated the Federal Reserve (Fed) to start cutting interest rates, and even raising concerns of another rate hike. Hit by the strong employment data, all four major U.S. stock indexes suffered a comprehensive rout, with the Philadelphia Semiconductor Index plunging over 10%, marking a rare decline in recent years. This dragged down Taiwan stock index futures, which at one point plunged over 4,400 points in night trading, eventually closing with a massive drop of 3,006 points, setting a record for the largest single-day point decline in history. The market fears that the Taiwan stock market may face severe volatility and heavy selling pressure when it opens on Monday.
The U.S. Department of Labor released data showing that May non-farm payrolls added 172,000 jobs, far above the market's original estimate of 80,000. The strong labor market performance prompted investors to reassess the Fed's monetary policy direction. The market's previous expectations for rate cuts within the year have significantly diminished, and some funds are beginning to worry that if inflationary pressures heat up again, the Fed may maintain high interest rates for a longer period, or even discuss the possibility of another rate hike.
Under this negative impact, U.S. stocks plunged across the board on the 5th. The Dow Jones Industrial Average fell 695.15 points; the NASDAQ plummeted 1,121 points; the S&P 500 dropped 200 points; and the tech-heavy Philadelphia Semiconductor Index slumped 1,396 points, a decline of 10.26%, becoming the epicenter of market panic.
Semiconductor stocks faced widespread selling pressure: Qualcomm fell 10.98%, AMD plunged 10.86%, Applied Materials dropped 9.71%, and Micron Technology tumbled 13.25%. AI concept stocks were not spared either, with NVIDIA falling 6.20% and Broadcom closing down 7.92%, indicating that market funds are rapidly exiting high-valuation tech stocks.
Taiwanese tech ADRs listed in the U.S. were also affected. ASE ADR slumped 11.38%, the deepest decline; TSMC ADR fell 6.69%; and UMC ADR closed down 5.24%. Due to the high correlation between Taiwan's heavyweight stocks and semiconductor groups with U.S. tech sectors, the market is full of worries about the future of Taiwan stocks.
The impact of the U.S. stock rout quickly reflected in the performance of Taiwan stock index futures during night trading. After night trading opened, selling pressure emerged, with the index plunging as much as 4,447 points to 40,779 points before slightly paring losses, but still closing sharply down 3,006 points at 42,220 points. This not only set a record for the largest single-day point decline in history but also reflected a rapid rise in market risk aversion. TSMC futures also weakened, eventually falling 145 points, or 6.12%, closing at 2,225 points.
In response to the market's drastic fluctuations, financial influencer Ye Yushuo posted an analysis on Facebook, pointing out that if no major positive news emerges over the weekend, the Taiwan stock market on Monday may directly challenge the historical record for the largest single-day point decline. He believes that the most frightening aspect for the market is not simply the decline, but the "longs killing longs" effect triggered by panic. Once investors start selling shares at any price, coupled with margin calls, forced liquidation of leveraged positions, and fund redemptions, a vicious cycle of "the more it falls, the more they sell; the more they sell, the more it falls" will form.
Financial writer Di Xiang also pointed out that when the market is at a stage of high deviation, it is very easy for stocks with positive returns to be indiscriminately sold off. Although such sharp declines may not necessarily change the long-term bullish trend, in the short term, it is often a process where leveraged investors are forced to stop losses and exit positions, further exacerbating the market decline.
However, Ye Yushuo also reminded investors that the real danger is not the stock market crash itself, but the excessive use of leverage when the market is at a high level. If investors hold fundamentally sound, high-quality companies with long-term competitiveness and have not used margin, loans, or high leverage, even if they face a sharp market correction, it is only a temporary shrinkage in book value, and they still have the opportunity to wait for market sentiment to stabilize and value to return.
