S&P 500 drops 2.6% as hot jobs data fuels rate hike fears

Tech stocks led a broad market rout Friday after a stronger-than-expected jobs report all but eliminated hopes for Federal Reserve rate cuts this year.

The S&P 500 fell 2.6% and the Nasdaq Composite plunged 4.2% after May payrolls more than doubled expectations, extinguishing rate-cut hopes. The Dow Jones Industrial Average slipped 1.4%, or nearly 700 points.

"Any hopes of a Fed rate cut have effectively been eliminated with this morning's strong jobs report," said Ronald Temple, chief market strategist at Lazard.

The technology sector dropped 4.3%, with only four of 73 S&P 500 information technology components finishing in positive territory. Semiconductor stocks bore the brunt: Nvidia fell 5%, Broadcom dropped 5.5%, and both Micron Technology and Advanced Micro Devices lost more than 9%. The four chipmakers erased over $500 billion in combined market capitalization by midday. Defensive sectors rotated higher, with consumer staples, healthcare, and utilities all posting gains. Coca-Cola rose 3.8%.

The selloff pushed the S&P 500 into negative territory for the week, snapping a nine-week winning streak — its longest since May 2025. The 10-year Treasury yield jumped to 4.55% from 4.47% before the release, while the dollar index rose 0.6% to 100.04. Traders now see a roughly 50% probability of a quarter-point rate hike by the Federal Reserve's October meeting, up from 34% a day earlier. All eyes turn to next week's May consumer price index report, which will determine whether the selloff deepens or stabilizes.

The selloff extended beyond equities. West Texas Intermediate crude fell 2.9% to $90.35 a barrel, and gold futures slid 3.6% to $4,345 an ounce. Bitcoin dropped below $60,000 for the first time since October 2024, dragging crypto-linked stocks down 7% to 12%.

Intel was among the week's biggest S&P 500 decliners, falling about 10% as its record rally stalled. The stock remains up nearly 180% year-to-date. Lululemon Athletica sank 8.5% to its lowest since 2018 after slashing its full-year outlook, citing headwinds and weak product reception.

On the upside, Cooper Companies gained 8% to lead the S&P 500 after the medical-device maker posted fiscal second-quarter results that topped analyst estimates.

The U.S. added 172,000 jobs in May, more than double the 80,000 consensus estimate, while the unemployment rate held steady at 4.3%. Revisions added a net 91,000 jobs to March and April figures, showing a labor market that has reaccelerated in 2026 despite geopolitical pressures from the Iran conflict and the Strait of Hormuz blockade.

This article is for informational purposes only and does not constitute investment advice.