S&P Falls Despite Blowout Jobs Data as Tech Rout Deepens

Wall Street ended the week on a sour note Friday, with the S&P 500 falling 1.6% despite a blockbuster May jobs report that far exceeded expectations. The disconnect between strong economic data and falling stocks highlights a market increasingly worried that the Federal Reserve will keep interest rates higher for longer.

Jobs Data Crushes Rate-Cut Hopes

The Labor Department reported that nonfarm payrolls surged by 172,000 in May, more than double the Dow Jones consensus estimate of 80,000. The unemployment rate held steady at 4.3%. The leisure and hospitality sector added 70,000 jobs, well above its recent monthly average of 14,000. The strong report defied expectations for a gradual cooling in the labor market and threw cold water on hopes for imminent rate cuts. According to the CME FedWatch tool, the probability of a rate hike by the end of 2026 jumped to 70%.

Treasury yields spiked in response, with the benchmark 10-year yield climbing 6 basis points to 4.544%, its highest level since May 21. The 2-year yield surged 11 basis points to 4.162%, its highest since February 2025. The move higher in yields weighed on equities, particularly rate-sensitive growth stocks.

Global Tech Rout Accelerates

The sell-off in tech stocks that began Thursday in the U.S. and Asia spread to Europe on Friday, triggered by a downbeat earnings report from Broadcom. The Stoxx 600 technology index fell 2.8%, with Infineon Technologies plunging 9.1% and ASML losing 2.4%. In Asia, South Korea's Kospi dropped 5.5%, with Samsung Electronics and SK Hynix tumbling 6.4% and 9.9%, respectively.

In the U.S., the Nasdaq Composite sank 2.6% as investors rotated out of AI-linked names into defensive sectors like consumer staples. The Dow Jones Industrial Average fell 0.7%. Broadcom's results sparked a reassessment of valuations across the semiconductor space, with investors questioning whether AI-driven demand can sustain the lofty multiples.

SpaceX Index Inclusion Denied

In a separate development, S&P Global reaffirmed its index inclusion rules, effectively blocking SpaceX from early entry into the S&P 500. The company, which recently completed the largest IPO in history raising $75 billion at a $1.75 trillion valuation, had lobbied for relaxed requirements. However, S&P stated it would not grant exceptions based solely on market capitalization, citing profitability rules that SpaceX fails to meet after posting a net loss of $4.94 billion in 2025.

Key Takeaways

1. Nonfarm payrolls surged 172,000 in May, more than double expectations, reducing the likelihood of Fed rate cuts.
2. The S&P 500 fell 1.6% as tech stocks plunged, with the Nasdaq down 2.6% amid a global semiconductor rout.
3. Treasury yields jumped, with the 2-year note hitting its highest level since February 2025, pressuring equities.
4. S&P Global denied SpaceX early entry into the S&P 500, citing profitability and seasoning requirements.

Sources: CNBC - Global Tech Sell-Off, CNBC - Daily Open, CNBC - SpaceX Index Entry, CNBC - Treasury Yields.