Nasdaq, S&P 500 suffer worst day of year, as AI stocks tumble, Fed rate-hike odds rise
Stocks and other risk assets fell Friday after strong US jobs data raised expectations of Federal Reserve rate hikes. The S&P 500 dropped 2.64% and the Nasdaq fell 4.18%; the VIX rose 40% to a two-month high. May jobs added 172,000, and CME FedWatch put a December hike chance at 43% (up from 26%). 10-year yields rose to 4.54%, pressuring tech; Broadcom guidance and Meta reports also weighed.
Guidance miss reinforces AI-semiconductor demand sensitivity and can pressure the whole AI chip complex via read-across.
Broadcom reported weaker-than-expected third-quarter chip revenue guidance, sending shares down 12.59% Thursday and 7.92% Friday.
Near-term downside bias for AI/semi names until new guidance stabilizes expectations.
Background
The selloff is framed around a strong May jobs print (172k vs expectations) shifting Fed easing expectations and lifting Treasury yields; AI stocks then sold off on guidance/financing headlines.
Why it matters
Strong labor data increases odds of later-year tightening, pressuring equities via higher yields; within tech, AVGO’s guidance miss and META’s reported equity-raise plans add company-specific risk to AI-linked trades.
Market relevance
This is a cross-asset risk-off day driven by rates repricing, with additional catalysts in AI-linked semis (AVGO) and AI capex financing (META).
Market effects
Higher-for-longer rate expectations plus AI/semis guidance sensitivity raise discount-rate pressure and compress AI-multiple support.
US risk assets sold broadly (stocks, bonds, crypto, gold), consistent with a US rates-driven de-risking impulse.
Higher US yields and risk-off sentiment can transmit to global tech/semis and cross-asset hedging flows.
Alternative perspectives
If the jobs strength is transitory and inflation cools, the rate-hike odds could mean-revert, allowing AI/semis to rebound quickly from oversold levels.
The article doesn’t quantify how much of the AI selloff is positioning/technical profit-taking versus fundamental demand changes; that mix can drive how persistent the move is.
Key entities
- macro policyFederal Reserve
Jobs strength raises odds of rate hikes later this year, with traders citing FedWatch probabilities.
- data sourceBureau of Labor Statistics
Released May jobs data cited as smashing expectations.
- market toolCME FedWatch
Used to quantify rising December hike odds (43% vs 26% a month ago).
- volatility gaugeVIX
Surged 40% to the highest level in two months, signaling risk-off.
