Friday’s Nasdaq Crash Was Just the Start, BofA Warns — Here’s What to Watch

TLDR

• The Nasdaq-100 fell 4.8% on Friday, its largest volatility-adjusted drop since October 2025
• Bank of America warns another 2% decline could trigger wider CTA (systematic fund) deleveraging
• Leveraged and inverse ETFs sold over $12 billion in Nasdaq exposure Friday — a record
• Stocks rebounded Monday, led by chip stocks like Nvidia and Micron after a sharp selloff
• Iran fired missiles at Israel, pushing oil prices up nearly 4%, adding to market uncertainty

Friday’s Nasdaq selloff has rattled markets and raised questions about how much further the selling could go. Here’s what happened and where things stand.

What Triggered Friday’s Selloff

The Nasdaq-100 dropped 4.8% on Friday — its biggest volatility-adjusted decline since October 2025 and the 13th worst such drop since 1985. The trigger was a stronger-than-expected May jobs report, which raised the odds of the Federal Reserve hiking interest rates later this year.

The strong jobs data pushed investors to reprice rate expectations. Higher rates tend to weigh on tech and growth stocks, which had been on a long winning streak.

Bank of America analyst Chintan Kotecha said the selloff likely started an unwind in systematic, or CTA, fund positioning. These are algorithm-driven funds that follow trends and automatically sell when prices fall past certain levels.

BofA estimated its stop-loss triggers for the Nasdaq-100 were roughly 4.3% to 6.8% lower than pre-Friday levels. That means the most risk-averse models likely started selling on Friday.

The bank warned the unwind may not be over. Another 90 basis points to 2% of downside could set off broader selling from more of those funds. Stop-loss levels for the S&P 500 sit about 40 basis points to 2.6% lower, and about 2% to 5% lower for the Russell 2000.

Leveraged and inverse ETFs sold over $12 billion in Nasdaq exposure on Friday alone — a record figure according to BofA data.

How Markets Responded Monday

Stocks bounced back on Monday. The Dow Jones rose about 0.3%, the S&P 500 gained roughly 0.6%, and the Nasdaq Composite climbed 0.9%.

Chip stocks led the recovery. Micron rose 9% and Nvidia added 2% after its CEO Jensen Huang suggested Friday’s selloff could be a buying opportunity in AI.

The S&P 500 had snapped a nine-week winning streak on Friday. Monday’s gains did not fully recover those losses, but they showed buyers returning to beaten-down tech names.

Investors now turn their attention to Wednesday’s Consumer Price Index report, which will show whether rising oil prices are pushing inflation higher. Fed rate decisions later in the year could hinge on that data.

Oracle is also reporting earnings Wednesday. The SpaceX IPO, expected to be the largest public offering on record, is set for Friday.

Elsewhere, Iran fired missiles at Israel for the first time since April. Israel struck back. Oil prices jumped nearly 4% to close to $98 a barrel on Brent crude before easing slightly.

That geopolitical tension adds another layer of uncertainty as investors try to assess the inflation and rate outlook heading into the rest of June.

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