Nasdaq 100 Sinks 3% as Fed-Hike Wagers Lift Yields: Markets Wrap
(Bloomberg) — Wall Street’s historic weekly run came to a halt, with stocks hit by a tech selloff and higher bond yields as a solid jobs report added to bets the Federal Reserve’s next rate move will be a hike.
While there was a lot to like in Friday’s economic data, the figures came at a time when inflation risks are already challenging the Fed. The S&P 500’s nearly 2% drop prevented the index from notching a 10th straight week of gains. The Nasdaq 100 sank over 3%, the most since October. Two-year yields jumped 12 basis points to 4.16%. Swaps are fully pricing in a rate increase by the end of 2026. Bitcoin briefly fell below $60,000.
The repricing of the Fed outlook took hold as markets also reassessed the artificial-intelligence trade that had led a surge from this year’s lows. This follows an impressive earnings season for AI companies, with investors questioning whether growth rates have peaked, according to Mark Hackett at Nationwide.
“We find ourselves facing another strong pullback in tech,” said veteran strategist Louis Navellier. “It appears to be a case of profit-taking in the semiconductors. Also hitting the market today are higher interest rates. It’s due to very strong job data, lowering expectations for a Fed rate cut.”
US job growth topped all forecasts in May and the unemployment rate held steady at 4.3%, offering the clearest sign yet that the labor market may be breaking out of a prolonged period of lackluster hiring.
“Today’s upside surprise underscores ongoing economic resilience, but it will also likely keep the Fed — and the markets — focused on inflation pressures,” said Ellen Zentner at Morgan Stanley Wealth Management.
The market may be treating today’s good news as bad news for equity prices, but this is a knee-jerk reaction as bond markets reprice the Fed path, according to Neil Dutta at Renaissance Macro Research.
“Ultimately, if the Fed is hiking because of expanding employment, I would not necessarily assume it is bad for the stock market outlook,” Dutta said. “Stagflation is bad for stocks, an inflationary boom is not.”
White House National Economic Council Director Kevin Hassett said investors are incorrect in interpreting the strong jobs report as suggesting the Fed will have to raise rates this year.
“I think that’s terribly wrong,” Hassett told Bloomberg Television. “What you need to do is look at the impact of oil-price shocks on core inflation and the history of it is that they are temporary, they don’t lead to lasting inflation.”
Swaps indicated traders expect a quarter-point increase in the US central bank’s target for the federal funds rate by the December policy meeting, with a roughly 60% chance of a move in October. Fed officials next meet June 16-17 under the leadership of new Chairman Kevin Warsh.
“If Chair Warsh pushes for cuts at his first meeting, he will be pushing against the evidence,” said Seema Shah at Principal Asset Management. “Our base case remains that the Fed stays on hold through 2026, but if employment data continues to track around May’s pace, rate hikes this year would come firmly into play.”
Corporate Highlights:
SpaceX has already received orders for more than the shares available in its $75 billion initial public offering, according to people familiar with the matter, putting the company on the verge of setting the record for the biggest-ever listing. Nvidia Corp. has certified the three biggest memory chipmakers to supply their most advanced high-bandwidth products for the US company’s AI accelerators, Chief Executive Officer Jensen Huang confirmed for the first time. A Delaware Chancery Court judge ordered Paramount Skydance Corp. to hand over some internal communications tied to the 2025 merger that created the company, handing a win to investors who suspect the deal unfairly enriched Shari Redstone at the expense of other investors. Anthropic PBC called for the creation of a system in which governments and AI developers collectively decide when to slow work on the technology to stave off the risks it may pose. Lululemon Athletica Inc. shares tumbled after the upscale yogawear company cut its annual forecast due to deteriorating performance in North America. Some of the main moves in markets:
Stocks
The S&P 500 fell 1.8% as of 1:45 p.m. New York time The Nasdaq 100 fell 3.4% The Dow Jones Industrial Average fell 0.8% The MSCI World Index fell 1.7% Currencies
The Bloomberg Dollar Spot Index rose 0.6% The euro fell 0.8% to $1.1523 The British pound fell 0.6% to $1.3342 The Japanese yen fell 0.2% to 160.33 per dollar Cryptocurrencies
Bitcoin fell 4.5% to $60,726.14 Ether fell 10% to $1,592.54 Bonds
The yield on 10-year Treasuries advanced six basis points to 4.54% Germany’s 10-year yield advanced two basis points to 3.04% Britain’s 10-year yield was little changed at 4.90% The yield on 2-year Treasuries advanced 12 basis points to 4.16% The yield on 30-year Treasuries advanced two basis points to 5.00% Commodities
West Texas Intermediate crude fell 3.1% to $90.16 a barrel Spot gold fell 3% to $4,341.97 an ounce ©2026 Bloomberg L.P.
