U.S. tech stocks faced a significant downturn on Friday, experiencing a decline of over 3% by midday. This sharp drop followed the release of a stronger-than-expected jobs report, which intensified speculation regarding potential interest rate hikes by the Federal Reserve later in the year.
According to the report, the economy added 172,000 nonfarm payrolls in May, far exceeding the forecasted 85,000 jobs. Additionally, payroll figures for March and April were revised upward, yielding a combined increase of 93,000 jobs. The unemployment rate remained unchanged at 4.3%. These robust labor market results, coupled with April’s inflation data—indicating a year-over-year increase of 3.8% in the consumer price index—the highest rate since May 2023—have bolstered expectations for more stringent monetary policies.
As a result, the likelihood of a quarter-point interest rate hike by the end of the year surged, with financial markets assigning a near certainty to this outcome. Furthermore, there is now approximately a 60% chance of an additional rate hike occurring in 2027. This anticipation has led to a notable rise in Treasury yields, with the 2-year yield climbing over 10 basis points to 4.15% and the 10-year yield reaching 4.54%. The U.S. dollar also gained strength, evidenced by a nearly 1% rise in the trade-weighted U.S. Dollar Index.
On Wall Street, the Nasdaq 100 took the brunt of the sell-off, plummeting 3.2% and heading towards its most significant daily drop since October 2025. High-growth tech stocks, particularly in the AI sector, felt the pressure from the escalating rate expectations. The S&P 500 index fell by 1.8%, while the Dow Jones Industrial Average saw a more modest decline of 0.8%, largely due to its lower exposure to technology stocks. The Russell 2000, which tracks small-cap stocks, also struggled, decreasing by about 2.6%.
Investors turned to the Volatility Index, commonly referred to as Wall Street’s fear gauge, which surged by 21%, indicating growing concern among traders. In the commodities market, precious metals faced a sharp selloff, with gold prices declining by 3.1% and silver experiencing an almost 7% plunge. Bitcoin mirrored the broader market’s distress, falling 17% this week, marking its worst weekly performance since November 2022, amid the widespread fallout from the FTX collapse.
In terms of sector performance, the Technology Select Sector SPDR Fund was the poorest performer, dropping around 5%, primarily due to weakness in semiconductors and AI hardware following the fallout from Broadcom’s recent results. Concurrently, the VanEck Gold Miners ETF slid approximately 7% as precious metals lost value. In contrast, defensive stocks gained ground, showcasing a clear rotation in investor sentiment towards safer assets in light of the market turmoil.
