US stocks fell sharply on Friday after a stronger-than-expected jobs report pushed rate hike bets higher and fresh concerns about AI spending weighed on tech stocks.
The Nasdaq dropped 2.1%. The S&P 500 fell 1.1%. The Dow Jones Industrial Average lost around 140 points, or 0.3%.
The selloff was driven by two separate forces hitting markets at the same time.
The Jobs Report
The May nonfarm payrolls report showed US employers added 172,000 jobs last month. Economists had expected around 88,000. The unemployment rate held steady at 4.3%.
The stronger-than-expected data shifted expectations around Federal Reserve policy. Traders moved quickly to price in at least one rate hike by year-end.
Odds of a rate hike jumped to 68.3%, up from 50.4% the day before. That effectively takes rate cuts off the table for now.
Eric Winograd, chief US economist at AllianceBernstein, said the data shows the economy is still holding up. “That’s enough to keep the Fed on hold,” he wrote.
This comes as President Trump continues to publicly push for rate cuts. Kevin Warsh, Trump’s appointee, has recently taken over as Fed chair.
Broadcom had already fallen sharply on Thursday following its earnings report. On Friday, shares dropped again.
The broader chip sector followed. Investors have grown more cautious about AI-related spending, and Broadcom’s results added to those concerns.
Tech stocks had rallied hard in recent weeks, helping lift the major indexes. That momentum has now stalled.
The Nasdaq had been one of the biggest beneficiaries of the AI trade. It is now one of the hardest hit as sentiment shifts.
The S&P 500 entered Friday looking for a 10th straight week of gains. That would have been the longest winning run since 1985.
That streak is now at risk of ending.
The index has pulled back as several headwinds converge — rate fears, tech weakness, and geopolitical uncertainty.
Reports of stalled US-Iran ceasefire negotiations added to the uneasy mood on Wall Street. President Trump said talks are in their “final” stages, but uncertainty remains.
Stock futures had already been pointing lower before the jobs data dropped, with Nasdaq 100 futures leading the declines through the morning session.
The combination of a hot labor market, hawkish rate expectations, and a wobbling AI trade left few safe places in equities on Friday.
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