S&P 500 Falls 2.6% on Tech Sell-Off, Jobs Data Spark Rate Hike Bets, June 07

The U.S. stock market suffered its worst day since October on Friday as technology stocks collapsed and a stronger-than-expected jobs report killed expectations for Federal Reserve rate cuts. The S&P 500 fell 2.6% to close lower, while the Nasdaq composite sank 4.2%. The sell-off erased the benchmark index’s nine-week winning streak and marked its first losing week in 10.

Tech Stocks Lead the Decline

Semiconductor and software companies drove the market lower. Micron Technology fell 13.3% for the largest loss in the S&P 500, while Nvidia dropped 6.2% and Broadcom slid 7.9%. Meta fell 5.5% after reports the social media company may seek a new stock offering to fund AI infrastructure spending.

These mega-cap tech stocks carry outsized weight in the broader index. Although stocks within the S&P 500 split nearly evenly between gainers and losers, the heavy losses in technology companies pulled the entire market down.

Jobs Report Kills Rate-Cut Hopes

The Labor Department reported the U.S. added 172,000 jobs in May, a surprise to the upside that sent bond yields soaring. The 10-year yield jumped above 4.5% as investors abandoned bets on Federal Reserve interest rate cuts. Markets now price a better than 60% chance the Fed will raise rates by year-end, according to CME FedWatch data.

Kevin Warsh heads his first policy meeting as Fed chair on June 16-17. Policymakers are expected to hold rates steady at that meeting, but the strong jobs report boosted expectations for future hikes despite pressure from President Donald Trump to lower borrowing costs.

Rotation Into Defensive Sectors

The massive sell-off in technology triggered a rotation into lagging sectors. Health care and financial stocks gained as investors fled growth names. Eli Lilly rose 2.4% for the week, while Wells Fargo gained 5.7%. The Dow Jones Industrial Average fell just 1.4%, cushioned by its exposure to dividend-paying financials and industrials.

This sector rotation reflects a shift in investor sentiment. Chip stocks nosedived in the final trading session after Broadcom disappointed on earnings earlier in the week, signaling weakness in the AI spending narrative that had driven the market higher.

What This Means for Investors

The sell-off signals a sharp reversal from the record highs posted earlier in the week. The S&P 500 snapped a nine-week winning streak, and the Nasdaq posted its worst week since the broader market correction. Investors should monitor Fed communications closely ahead of the June 16-17 policy meeting, as rate expectations now lean toward tightening rather than cuts.

Final Thoughts

Tech stocks crashed on strong jobs data that killed rate-cut bets and sent yields above 4.5%. With the Fed now expected to hold or raise rates, investors face a shift from growth to value. Monitor Fed communications before the June 16-17 meeting.

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