Stock Market Plunges on Strong Jobs Report, Rising Rate Hike Odds
U.S. stocks fell sharply on June 5 as a stronger-than-expected May jobs report boosted expectations for Federal Reserve interest rate hikes, sending the tech-heavy Nasdaq down nearly 3% and triggering a broader market selloff. Payroll growth of 172,000 jobs far exceeded the 80,000 forecast, raising the probability of a December rate hike to 70%.
Market Turmoil Fueled by Jobs Strength
Payrolls increased by 172,000 in May — well above the expected 80,000 — and the unemployment rate remained steady at 4.3%. This resilience in the labor market triggered immediate selling pressure across U.S. equity markets on Friday. The Nasdaq Composite suffered a massive decline on Friday. The tech-heavy index dropped 4.18% to end the day at 25,709.43.
Rate Hike Fears Drive Sector Rotation
The reason markets fell on the report, which showed resilience in the labor market, is that it increased the likelihood of a Federal Reserve rate hike this year. Economists now think there's a 70% probability of interest rates rising in December, if not before. Artificial intelligence (AI) and chip bellwethers led declines this morning as Nvidia (NASDAQ:NVDA), Advanced Micro Devices (NASDAQ:AMD), and Micron Technology (NASDAQ:MU), all dropped on fresh doubts around lofty valuations.
Broader Market Impact and Bond Market Reactions
The S&P 500 shed 2.64% to close at 7,383.74, while the Dow Jones Industrial Average lost 695.15 points, or 1.35%, to end at 50,866.78. Most regional sectors were in the green, but technology and miners were the key outliers, sliding 2.1% and 2%, respectively, as the sell-off in U.S. chipmakers spread to European markets. Dutch semiconductor mainstay ASML was last seen 3.8% lower, while German chipmaker Infineon Technology slumped more than 6% in morning trade.
Global Contagion and Investor Sentiment
The selloff spread internationally, with major Asian markets declining. The Kospi ended Friday's session 5.54% lower at 8,160.59. Index heavyweights Samsung Electronics and SK Hynix dropped 6.40% and 9.92%, respectively. Investors rotated defensively into healthcare and consumer staples, reflecting heightened anxiety about the outlook for growth-dependent sectors.