Nasdaq 100 Sinks 4% in AI-Led Rout as Yields Climb: 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.
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. Growing anxiety about valuations sent the S&P 500 down 2.4%, with the index failing to complete a 10th straight week of gains. The Nasdaq 100 sank 4%, the most since April 2025. A gauge of chipmakers slid 9%. Meta Platforms Inc. sank 5.5% as the Financial Times said the firm is weighing a share sale.
The concerted selloff in stocks, bonds and crypto was the biggest setback in months for the latest leg of the bull market, which traces to the end of March when negotiations began in earnest to end war in Iran. Concern has grown recently about the sustainability of an AI-fueled rally that had pushed the Philadelphia Semiconductor Index toward its best quarter ever and made trillion-dollar behemoths out of chipmakers Micron Technology Inc. and Samsung Electronics Co.
The tech selloff also followed 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.”
While there was a lot to like in Friday’s economic data, the figures came at a time when inflation risks are challenging the Fed. Treasury two-year yields jumped 11 basis points to 4.16%. Swaps are fully pricing in a rate increase by the end of 2026. The dollar rose. Bitcoin slid below $60,000.
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 economic 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.”
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:
President Donald Trump said his administration is still considering a public offering of shares in mortgage giants Fannie Mae and Freddie Mac, days after he said he was appointing his top housing official to oversee the government’s network of intelligence agencies. A quiet effort by Morgan Stanley to prevent retail investors from placing multiple orders for shares of SpaceX in the rocket company’s massive initial public offering is facing pushback from some of the country’s largest brokerages. 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. The top lawyers for several states are drafting a legal challenge to Paramount Skydance Corp.’s $110 billion deal to buy Warner Bros. Discovery Inc., laying the groundwork for an antitrust suit over the Hollywood mega-deal. 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 2.4% as of 3:01 p.m. New York time The Nasdaq 100 fell 4.2% The Dow Jones Industrial Average fell 1.3% The MSCI World Index fell 2.2% Currencies
The Bloomberg Dollar Spot Index rose 0.6% The euro fell 0.8% to $1.1522 The British pound fell 0.6% to $1.3337 The Japanese yen was little changed at 160.14 per dollar Cryptocurrencies
Bitcoin fell 6.9% to $59,190.73 Ether fell 13% to $1,545.41 Bonds
The yield on 10-year Treasuries advanced six basis points to 4.53% Germany’s 10-year yield advanced two basis points to 3.04% Britain’s 10-year yield was little changed at 4.90% Commodities
West Texas Intermediate crude fell 2.9% to $90.35 a barrel Spot gold fell 3.5% to $4,317.17 an ounce ©2026 Bloomberg L.P.
