US stocks closed sharply lower on Friday as a broad selloff in semiconductor shares and a stronger-than-expected jobs report sparked concerns that the Federal Reserve could maintain a hawkish stance on interest rates.
The technology-heavy Nasdaq Composite fell more than 4%, marking its largest one-day decline since the tariff-driven market turmoil of early 2025.
The S&P 500 dropped 2.6%, while the Dow Jones Industrial Average lost about 685 points, or 1.3%, after having closed at a record high a day earlier.
The sharp decline also brought an end to the S&P 500’s nine-week winning streak, its longest run of Friday-to-Friday gains since late 2023.
Semiconductor stocks lead market lower
Selling pressure was concentrated in semiconductor stocks, which have been among Wall Street’s strongest performers this year amid enthusiasm surrounding artificial intelligence infrastructure spending.
The Philadelphia Semiconductor Index slumped about 9% on Friday after falling 2% in the previous session.
Broadcom shares declined more than 7%, extending Thursday’s 12% drop after investors reacted negatively to the company’s latest earnings report and AI revenue outlook.
The company beat quarterly expectations but did not raise its full-year AI semiconductor forecast, disappointing investors who had anticipated stronger guidance.
The weakness spread across the sector. Micron Technology dropped roughly 11%, adding to an 8% decline on Thursday, while Intel fell more than 9% and Advanced Micro Devices slid around 10%.
Marvell Technology also lost about 12%.
Strong jobs report fuels rate concerns
Investor sentiment was further pressured after the US Labor Department reported that nonfarm payrolls increased by 172,000 in May, well above expectations for about 80,000 new jobs.
The unemployment rate remained steady at 4.3%.
While the data reinforced confidence in the strength of the US economy, it also reduced expectations for near-term Federal Reserve easing.
Treasury yields climbed sharply following the report, with the 10-year yield moving above 4.5% and the 30-year yield rising above 5%.
Financial markets are now pricing in a growing likelihood of a rate hike by the Fed before the end of the year.
Investors rotate toward defensive sectors
The market decline was accompanied by a shift toward more defensive investments.
Healthcare and consumer staples stocks outperformed, with Colgate-Palmolive and Coca-Cola each rising more than 3%, while Johnson & Johnson gained about 2%.
Cryptocurrency-related stocks also weakened as bitcoin fell below $60,000 for the first time since late 2024.
Coinbase Global and Strategy moved lower alongside the digital asset.
Some investors also pointed to next week’s highly anticipated SpaceX initial public offering as a potential factor behind the rotation out of technology leaders.
Geopolitical concerns also remained in focus as uncertainty surrounding the Middle East conflict continued to cloud the market outlook, adding to investor caution heading into the weekend.
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