Major United States benchmark averages ended sharply lower on Friday (Saturday AEST), bringing its nine-week winning streak to an abrupt halt as technology stocks suffered their steepest one-day decline since April 2025 following stronger-than-expected U.S. employment data that fuelled concerns the Federal Reserve may maintain a hawkish policy stance.
The sell-off was concentrated in semiconductor and technology shares, which have led the market higher in recent weeks and helped both the Nasdaq Composite and S&P 500 repeatedly reach record highs.
The Dow Jones Industrial Average dropped 695.2 points, or 1.4%, to 50,866.8. The S&P 500 fell 200.6 points, or 2.6%, to 7,383.7, while the Nasdaq Composite plunged 1,121.5 points, or 4.2%, to 25,709.4.
Investor sentiment weakened after the latest nonfarm payrolls report showed the U.S. economy added 172,000 jobs in May, significantly above expectations for 85,000. The unemployment rate remained unchanged at 4.3%.
While the stronger labour market data reinforced confidence in the resilience of the U.S. economy, it also reduced expectations that the Federal Reserve will begin cutting interest rates in the near term.
According to the CME Group FedWatch Tool, financial markets are now pricing a 46.7% probability of a 25 basis point (bp) rate hike and a 22.1% chance of a 50bp hike by the conclusion of the Federal Reserve's December meeting.
Concerns over inflation were also amplified by ongoing tensions in the Middle East. Hopes for a near-term resolution to the conflict and a reopening of the Strait of Hormuz continued to fade, raising fears that elevated energy prices could feed through to broader inflation pressures.
Iran reaffirmed its support for Hezbollah and called for Israel to withdraw its forces from southern Lebanon, complicating efforts to secure a peace agreement that would facilitate the resumption of traffic through the strategically important waterway.
Although the administration of U.S. President Donald Trump has brokered three separate truces that have significantly reduced hostilities, both sides continue to exchange airstrikes.
Technology stocks led the market lower, with semiconductor companies suffering heavy losses. Nvidia, the world's largest company by market capitalisation, fell 6.2%.
Intel shed 11.3%, Micron dipped 13.3%, AMD lost 10.9%, and Broadcom declined 7.9%.
Among individual companies, Lululemon Athletica dropped 8.6% after the sportswear retailer lowered its full-year profit forecast and issued second-quarter earnings guidance that fell well below analyst expectations.
In contrast, Cooper Companies gained 8.6% after the contact lens manufacturer reported second-quarter results that exceeded market forecasts.
Cryptocurrency-related stocks also came under pressure as bitcoin retreated. Coinbase fell 7.1%, while Strategy declined 6.9%, reflecting a 4.1% fall in the price of the digital asset.
On the bond markets, yields moved higher as investors reassessed the outlook for monetary policy. The yield on the benchmark 10-year U.S. Treasury note rose 1.3% to 4.532%, while the two-year Treasury yield climbed 2.5% to 4.145%.
