US stock markets suffered their worst decline of the year on Friday as investors fled technology stocks and reassessed interest rate expectations following stronger-than-expected jobs data. The Nasdaq fell 4.2 percent, marking its steepest single-day drop since April 2025, while the S&P 500 declined more than 2.6 percent, ending nine consecutive weeks of gains.
The selloff centered on chip and technology companies, with semiconductor stocks experiencing sharp declines. Broadcom and Intel shares dropped along with other major chip manufacturers including AMD, Micron, Qualcomm, and Super Micro. The technology-heavy Nasdaq bore the brunt of selling pressure as investors rotated away from artificial intelligence and megacap technology stocks that had driven much of the market's recent gains.
The market decline came after the Labor Department reported that US employers added 172,000 jobs in May, substantially exceeding economist forecasts. The robust hiring data prompted traders to increase their expectations that the Federal Reserve may resume raising interest rates to combat persistent inflation. Higher interest rates typically reduce the appeal of growth-oriented technology stocks, whose valuations depend heavily on future earnings.
Bitcoin also fell below $60,000 for the first time since the November 2024 election, reflecting a broader shift in investor sentiment away from digital assets and toward other investment opportunities.
The Dow Jones Industrial Average, which includes fewer technology companies, posted modest gains and reached a record level, suggesting investors sought refuge in more traditional industrial and financial stocks. Market analysts said the divergence demonstrated that some sectors could continue performing well even as the technology trade cooled. The sharp contrast between the Dow's performance and the Nasdaq's decline highlighted the concentrated nature of recent market weakness in the technology sector.
The selloff underscores ongoing tensions for investors balancing inflation concerns against growth prospects. While strong employment data signals economic resilience, it also raises the likelihood of additional Fed rate increases that could slow business expansion. This dynamic has created uncertainty about whether technology stocks, which soared on optimism about artificial intelligence applications, can sustain their momentum.
Analysts noted that the market rotation suggests investors are reassessing their strategy after months of technology dominance. Some are moving capital into defensive sectors and traditional value stocks that typically perform better in higher interest rate environments. The employment report effectively reset market expectations about the Fed's path forward, with traders now pricing in a greater probability of rate increases rather than the cuts that had been anticipated earlier in the year.
The day's trading illustrated how sensitive markets remain to economic data and Federal Reserve policy signals. As investors digest the implications of stronger hiring for inflation and interest rates, the question remains whether the technology sector's recent strength has run its course or if this represents merely a temporary pullback before renewed gains.