S&P 500 sinks 1.6% as hot jobs data reignites rate hike fears

A stronger-than-expected May jobs report sent stocks tumbling Friday as traders priced in a greater likelihood the Federal Reserve will raise interest rates before year-end.

The S&P 500 fell 1.6% to 7,463 after the U.S. added 172,000 jobs in May, more than double the 80,000 consensus estimate.

"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 tech-heavy Nasdaq Composite slumped 2.65% to 26,122, while the Dow Jones Industrial Average lost 373 points, or 0.7%, to 51,182. All 11 S&P 500 sectors except energy finished lower, with information technology the worst performer. Nvidia fell 4.6%, Broadcom dropped 5.9%, and Micron Technology slid 8%, extending a selloff that began after Broadcom's post-earnings decline Thursday. Lululemon Athletica sank 9.2% after trimming its revenue and profit forecasts.

The data raises the probability the Fed will hike rates at its December meeting to about 70%, according to CME FedWatch, up from roughly 50% before the release. The central bank's next policy decision is scheduled for June 16-17, where officials are widely expected to hold rates steady despite pressure from President Donald Trump to lower borrowing costs.

Tech Leads Selloff as Yields Break Higher

The selloff was broad but concentrated in high-valuation technology names that have powered the S&P 500 to a series of records over the past two months. The S&P 500 information technology sector fell more than 3%, while communication services and consumer discretionary each dropped more than 1.5%. Defensive sectors held up better, with utilities and consumer staples declining less than 0.5%.

The 10-year Treasury yield rose to 4.54% from 4.50% before the report, while the 2-year yield jumped to 4.16% from 4.04%. The VIX climbed above 22, its highest level in three weeks, as trading volume on U.S. exchanges exceeded the 20-day average by roughly 15%. Declining stocks outnumbered advancing ones by more than 2-to-1 on the New York Stock Exchange.

Oil Retreats, Gold Gains on Geopolitical Crosscurrents

Brent crude fell 1.6% to $93.50 a barrel after Israel and Lebanon renewed their ceasefire agreement, easing supply concerns tied to the Iran conflict. Gold futures advanced 0.9% to above $4,500 an ounce as investors rotated into haven assets during the equity selloff.

The May jobs report marks the third consecutive month of job gains, the first such stretch since early 2025, showing the labor market is stabilizing after a shaky start to the year. But for equity investors, that stability comes with a cost: a higher bar for rate cuts that had been priced into elevated valuations across the technology sector. The S&P 500 had risen more than 9% year-to-date entering Friday, leaving it vulnerable to a repricing of rate expectations.

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