Stocks Tumble as Strong Jobs Report Sparks Rate-Hike Fears and Tech Selloff

The stock market ended the week with a sharp selloff as investors grappled with a stronger-than-expected employment report, rising Treasury yields, and an accelerating retreat across technology and semiconductor stocks. The S&P 500 fell 2.6%, the Nasdaq Composite plunged 4.2%, and the Dow Jones Industrial Average lost 1.4%, resulting in negative weekly performances for all three major averages.

The decline marked a significant shift in sentiment and snapped the S&P 500’s impressive nine-week winning streak.

Friday’s weakness was driven by a combination of factors, but the catalyst was the May Employment Situation Report. Nonfarm payrolls increased by 172,000, easily surpassing expectations of 96,000 and reinforcing the view that the labor market remains resilient despite tighter monetary conditions.

The stronger-than-expected data prompted investors to reassess the Federal Reserve’s path forward. Treasury yields moved sharply higher as markets increased the likelihood that policymakers may need to tighten policy further. According to the CME FedWatch Tool, the probability of a rate hike at the December FOMC meeting jumped to roughly 71%, up from around 50% just one day earlier.

Higher yields proved particularly damaging for growth-oriented sectors, where valuations are more sensitive to interest rate expectations.

Technology stocks bore the brunt of the selling pressure. The information technology sector plunged 5.3%, dragged down by another wave of weakness across semiconductor and software names. The Philadelphia Semiconductor Index tumbled 10.3%, extending Thursday’s decline and marking one of its sharpest pullbacks in months.

Selling was widespread across the chip sector. Broadcom extended its post-earnings decline, while memory-related stocks suffered particularly steep losses. Micron fell more than 13%, while Intel and NVIDIA both posted double-digit or near double-digit declines as investors continued to unwind positions in some of the market’s strongest performers.

Software stocks also came under pressure. Oracle retreated sharply ahead of next week’s earnings release, while the iShares Expanded Tech-Software Sector ETF fell 4.2%.

Weakness spread beyond technology as investors reduced exposure to other growth-oriented areas of the market. The consumer discretionary sector declined 2.4%, weighed down by sharp losses in Tesla and lululemon athletica. Lululemon came under particular pressure after lowering its full-year guidance. Communication services fell 1.7%, with Meta Platforms among the notable laggards.

The Vanguard Mega Cap Growth ETF dropped 3.7%, highlighting the intense pressure on the market’s largest growth stocks. As a result, the market-cap-weighted S&P 500 significantly underperformed the equal-weighted version of the index, which fell a comparatively smaller 1.5%.

While defensive sectors attracted some rotational buying, the support was limited relative to the magnitude of the selling elsewhere. Consumer staples led the market with a 1.6% gain, while utilities, health care, and real estate also finished modestly higher. Financials managed to edge into positive territory as well.

Small-cap stocks suffered alongside the broader risk-off move. The Russell 2000 dropped 3.5%, underperforming the major averages as rising yields created additional pressure on economically sensitive and rate-sensitive companies.

Friday’s selloff reflected a significant repricing of interest-rate expectations at a time when technology stocks were already vulnerable following an extended rally. The combination of higher Treasury yields, renewed concerns about future Fed policy, and continued weakness in semiconductors proved too much for the market to absorb.

Despite the sharp decline, investors will now turn their attention to next week’s inflation data and upcoming earnings reports to determine whether Friday’s move represents a healthy correction within an ongoing bull market or the beginning of a more meaningful shift in market leadership and risk appetite.

Our FTinvest 11 model portfolio declined 1.54% to close at 1,014.06, marking the third consecutive session of losses and extending the pullback from the portfolio’s all-time high of 1,078.93. The recent weakness has erased a portion of the strong gains accumulated earlier in the year, with short-term sentiment remaining cautious following the volatility that emerged at the start of June.

Nevertheless, FTinvest 11 still remains up approximately +9.25% year-to-date, preserving a solid gain despite the recent correction. The portfolio is now approximately 6.0% below its all-time high, a notable retreat but still well short of correction territory. While momentum has weakened in the near term, FTInvest 11 continues to benefit from its disciplined, value-driven investment strategy and remains positioned for long-term capital appreciation.