Hot Jobs Report Triggers Tech Selloff, Nasdaq Drops 4.2% on Rate Fears

A stronger-than-expected May jobs report blindsided markets Friday, triggering a sharp selloff in AI and technology stocks as investors scrambled to reprice interest rate expectations higher. Employers added 172,000 jobs in May — more than double the 80,000 economists had forecast — sending the 10-year Treasury yield past 4.5% and the 2-year yield to 4.16%, its highest in a year. The Nasdaq composite fell 4.2% on the day, marking its worst weekly decline in over a year at -4.7%, while the S&P 500 dropped 2.6%, snapping nine consecutive weeks of gains.

AI-linked chipmakers bore the brunt of the damage. Nvidia slid 6.2% and Broadcom fell 7.9%, the latter already weakened by relatively cautious guidance issued Wednesday that raised doubts about the pace of AI demand growth. Micron, Marvell, Intel, AMD, Qualcomm, and ARM Holdings all fell 10% or more. The dynamic reflects a structural vulnerability in high-growth tech: elevated bond yields compress the present value of profits projected years into the future, making richly valued AI names particularly exposed to rate spikes.

Traders dramatically repriced Fed expectations after the report. The probability of a rate hike by year-end jumped to roughly 70%, up from just under 50% before the data dropped, according to CME data. Investors now broadly expect the Fed to hold rates elevated throughout 2026, reversing earlier hopes of cuts. President Trump pushed back on the market reaction, posting that a strong jobs report should lift stocks and insisting that growth does not equal inflation.

Crypto markets were also hit hard. Bitcoin briefly fell to $59,112 — its lowest intraday level since October 2024 — before a modest recovery, and logged its worst weekly performance since the crypto winter of late 2022. The slide was accelerated after Michael Saylor's bitcoin accumulation firm Strategy disclosed it had sold a portion of its holdings earlier in the week. Strategy shares fell 7%, Coinbase dropped 7%, and stablecoin issuer Circle Internet Group tumbled more than 11%.

Defensive sectors provided a rare refuge. Kimberly-Clark surged 6.3%, helping consumer staples become the S&P 500's top-performing sector on the day. Walmart, Procter & Gamble, Coca-Cola, General Mills, and McDonald's all closed in positive territory. Meanwhile, Saks Global received bankruptcy court approval for its reorganization plan, clearing the way to exit Chapter 11 within weeks after eliminating roughly 75% of its debt and repairing relationships with luxury suppliers including Chanel and LVMH.