Wall Street retreats as chip stocks slide and stronger jobs data fuels Fed hawkishness fears

Major US stock indexes moved lower on Friday as semiconductor stocks came under pressure following a strong rally, while a stronger-than-expected US jobs report reinforced expectations that the Federal Reserve could maintain a more hawkish monetary policy stance.

The latest labor market data showed that nonfarm payrolls increased by 172,000 jobs in May, following a gain of 115,000 jobs in April. The figure far exceeded economists’ expectations of 85,000 new jobs, according to a Reuters survey.

Following the report, financial markets sharply increased expectations for tighter monetary policy. Investors now see a 98% probability that the Federal Reserve will raise interest rates by 25 basis points before the end of the year, compared with roughly 60% prior to the employment data.

The report comes ahead of the first policy meeting under new Federal Reserve Chair Kevin Warsh later this month, as policymakers continue to grapple with elevated inflation pressures, partly intensified by the conflict in the Middle East.

Mark Malek, Chief Investment Officer at Siebert Financial, said the labor market remains resilient despite signs of moderation.

“You can’t say the labor market is booming, but it’s certainly not collapsing either,” Malek said.

He added that a pullback after recent gains would be healthy for the market.

Technology sector under pressure

Shares of chipmakers led the decline. Semiconductor giant NVIDIA, currently the world’s most valuable company by market capitalization, fell 2.5%.

Meanwhile, shares of Intel, Micron Technology, Advanced Micro Devices, and Broadcom declined between 4.2% and 6.2%.

The technology sector dropped 2.5% for a third consecutive session, while the Philadelphia Semiconductor Index slid more than 5%.

Chip stocks had previously been a major driver of Wall Street’s rebound from March lows to record highs, supported by enthusiasm surrounding artificial intelligence and strong corporate earnings.

At the same time, six of the eleven major sectors within the S&P 500 traded higher, with consumer staples leading gains as investors rotated into more defensive areas of the market.

Market performance

By 9:43 a.m. Eastern Time, the Dow Jones Industrial Average was down 128.36 points, or 0.25%, at 51,433.57.

The S&P 500 fell 64.63 points, or 0.85%, to 7,519.68, while the Nasdaq Composite declined 374.02 points, or 1.39%, to 26,456.94.

If losses hold through the close, the S&P 500 would record its first weekly decline since April, while the Nasdaq would end the week modestly lower. The Dow, however, remained on track for a third consecutive weekly gain.

Geopolitics and corporate news

US-Iran negotiations remained stalled heading into the weekend, highlighting the continued complexity of efforts to reach a broader peace agreement and reduce geopolitical risks.

Meanwhile, [Citigroup](https://www.citigroup.com?utm_source=chatgpt.com) said it had reduced its equity exposure following the recent rally, citing inflation concerns and crowded investor positioning, while maintaining a positive long-term outlook for US stocks driven by AI-related earnings growth.

Among individual stocks, Lululemon Athletica dropped 8% after lowering its full-year profit outlook and issuing quarterly guidance below Wall Street expectations.

In contrast, The Cooper Companies gained 6.4% after reporting second-quarter results that exceeded expectations.

S&P Global announced it would not change the inclusion criteria for its major indexes, reducing the likelihood that SpaceX will join the S&P 500 immediately following its anticipated IPO, which could become the largest public offering in history.

At the same time, S&P Dow Jones Indices is preparing to announce the results of its regular index rebalancing after the market close. Marvell Technology is viewed as one of the leading candidates for inclusion in the benchmark index after surpassing a market value of $270 billion.

Market breadth remained negative, with declining stocks outnumbering advancing stocks by 2.04-to-1 on the NYSE and 2.11-to-1 on the Nasdaq.

The S&P 500 recorded seven new 52-week highs and two new lows, while the Nasdaq posted 27 new highs and 38 new lows.