U.S. employment data for May came in stronger than market expectations, prompting Wall Street to reassess the Fed’s interest rate path. As a result, U.S. stocks opened lower on Friday, bond yields rose in tandem, and tech stocks faced particularly pronounced pressure.
Non-farm payrolls exceeded expectations
Data shows that the U.S. added 172,000 non-farm payroll jobs in May, significantly exceeding the market expectation of 80,000. The unemployment rate was 4.3%, in line with expectations.
This data indicates that the U.S. labor market remains resilient, cooling market expectations for rate cuts in the near term. Traders subsequently increased their bets on another rate hike this year.
U.S. Treasury yields rise rapidly
Following the release of employment data, U.S. Treasuries were sold off, with yields across major maturities generally rising.
- The 10-year U.S. Treasury yield rose above 4.5%.
- The 30-year U.S. Treasury yield rose above 5%.
- The 2-year U.S. Treasury yield has also risen significantly.
Rising yields suggest that financing costs may remain elevated, while also increasing the appeal of fixed-income assets, placing greater pressure on riskier assets such as stocks.
Tech stocks weighed on major indices.
After opening on Friday, the S&P 500 fell about 1%, the Nasdaq Composite dropped approximately 1.6%, and the Dow Jones Industrial Average declined by about 150 points, or 0.3%.
The technology sector led declines, with semiconductor stocks continuing to weaken. Marvell Technology fell over 8% at one point, while Micron Technology dropped about 6%. Over the past year, chip stocks have been a major driver of U.S. stock market gains, and their current pullback has intensified pressure on the indices.
However, the market is not uniformly weakening. Capital is still flowing into sectors such as finance, healthcare, industrials, and consumer goods, indicating that investors are more likely rebalancing their allocations rather than exiting the stock market overall.
From a weekly performance perspective, the S&P 500 may record its first weekly decline in nearly ten weeks, while the Nasdaq is down nearly 2% this week. Following the employment data shifting interest rate expectations, market volatility may continue to intensify in the short term.