S&P 500 down 2.6%; US jobs data more than double forecasts; odds of rate hike this year hit 70%

[Reuters]
[Reuters]

A stronger-than-expected US jobs report sent Wall Street sharply lower Friday. Robust employment data raised the prospect of further Federal Reserve tightening and triggered a broad selloff concentrated in the technology and semiconductor stocks that had driven the AI rally.

The Dow Jones Industrial Average closed down 695.15 points, or 1.35%, at 50,866.78 on Friday.

The S&P 500 fell 200.63 points, or 2.65%, to 7,383.68, while the Nasdaq tumbled 1,121.53 points, or 4.18%, to 25,709.43.

For the week, the S&P 500 and Nasdaq dropped 2.6% and 4.7%, respectively, snapping nine consecutive weeks of gains.

Investor sentiment soured after the US Department of Labor reported that nonfarm payrolls rose by 172,000 last month — more than double the market consensus of 80,000.

The stronger labor market prompted traders to begin pricing in the possibility that the Fed could raise interest rates before year-end.

AI and semiconductor stocks bore the brunt of the selloff. Micron plunged 13.25%, while memory chip makers SanDisk and Western Digital fell 11.39% and 11.06%, respectively. Intel dropped 11.28%, AMD shed 10.86%, and Lam Research declined 9.85%.

Broadcom extended its losses, falling 7.92% after tumbling 12.6% the previous day. The two-session slide reflected concern that the AI data center investment cycle may have peaked after the company declined to raise its annual AI semiconductor sales outlook.

Seo Sang-young, an analyst at Mirae Asset Securities, said uncertainty about AI-led growth had come into sharper focus following Broadcom's latest sales guidance. "There are also growing concerns that hyperscalers, which have been expanding capital expenditure through debt financing, could face higher funding costs as the Fed signals a more hawkish stance," he said.

Major big-tech names also fell across the board: Nvidia dropped 6.20%, Microsoft 2.66%, Amazon 3.06% and Tesla 6.56%. Meta slid 5.51% after reports emerged that it was considering a share offering.

The planned SpaceX initial public offering next week was also cited as a potential headwind. Carol Schleif, chief market strategist at BMO Private Wealth, said some investors appeared to be raising cash to participate in the large IPO. "Given how sharply technology stocks have surged in a short period, a correction is equally a natural flow," she said.

Bond markets were also rattled. Selling in US government bonds pushed the 10-year Treasury yield up 0.06 percentage point to 4.54%, while the 30-year yield climbed to 5.004%, breaking through the psychologically significant 5% threshold. The policy-sensitive 2-year yield surged 0.11 percentage point to 4.16%.

Rate-hike expectations weighed on gold and bonds alike. August gold futures on the New York Mercantile Exchange fell 3.1% to $4,365.30 per ounce, erasing all of this year's gains.

The dollar strengthened. The dollar index, which measures the greenback against six major currencies, rose to 100.8, recovering the 100 level for the first time since April.

Oil prices fell on hopes of easing tensions between the United States and Iran. Brent crude dropped 2.0% to $93.09 a barrel, while West Texas Intermediate declined 2.7% to $90.54 a barrel.


moon@heraldcorp.com