Wall Street slumps as chips slide, robust jobs data stokes fears of hawkish Fed

NEW YORK - Wall Street tumbled on Friday as semiconductors extended their selloff while a robust employment report fueled fears of a hawkish policy pivot from the Federal Reserve.

All three major U.S. stock indexes were in negative territory, with an 8.1% plunge in chips, their steepest daily plunge since the "Liberation Day" tariff rout, dragging the tech-laden Nasdaq down 3.1%, its largest one-day percentage drop since October 10.

Over the last three days of selloffs, tech and chips have tumbled more than 7.5% and 9.1%, respectively.

The S&P 500 was poised to snap its nine-week run of Friday-to-Friday gains, its longest weekly winning streak since one that ended in December 2023.

The Nasdaq was also on course to log a weekly decline, but the blue-chip Dow was set for a nominal gain on the week.

Tech shares declined for a third straight session, falling 4.6%.

The U.S. economy added 172,000 jobs in May, according to the Labor Department, more than double analyst expectations, while the unemployment rate held firm at 4.3%. The robust report was double-edged: it provided reassurance of U.S. economic health, but all but killed any hopes of an interest rate cut from the Fed in the near future.

"It's a good report, and it shows that the labor market has certainly survived its latest slowdown, and it's another reason to believe that the Fed's next move will be a hike in interest rates," said Peter Cardillo, chief market economist at Spartan Capital Securities in New York.

Financial markets are pricing in a 42.8% likelihood of a rate hike at the conclusion of the Fed's December meeting, up from 38.2% on Thursday and 26.1% one month ago, according to CME's FedWatch tool.

Fading hopes for a near-term resolution to the Middle East war and reopening the Strait of Hormuz are stirring fears that energy price pressures could morph into wider, systemic inflation.

Iran reaffirmed its support for Hezbollah and demanded that Israel withdraw its troops from southern Lebanon, further complicating efforts to secure a near-term peace deal that would include the resumption of traffic through the crucial strait. U.S. President Donald Trump's administration has negotiated three truces, and while fighting has been greatly reduced, the two sides continue to trade airstrikes.

The CBOE Market Volatility Index, often dubbed the "fear index," surged to a two-week high.

The Dow Jones Industrial Average fell 439.25 points, or 0.85%, to 51,122.68, the S&P 500 lost 138.07 points, or 1.82%, to 7,446.24 and the Nasdaq Composite lost 823.61 points, or 3.07%, to 26,007.35.

Among the 11 S&P 500 sectors, tech was down the most, while consumer staples led the percentage gainers.

Nvidia, the largest company by market value, lost 5.6%, while Intel, Micron, AMD and Broadcom slid between 6.8% and 10.5%.

Lululemon Athletica slumped 8% after the athletic apparel maker cut its annual profit forecast and projected second-quarter earnings well below Wall Street estimates.

Cooper Companies rose 7.6% after the contact lens maker beat estimates for second-quarter results.

Cryptocurrency firms Coinbase and Strategy dropped 9.5% and 11.2% as bitcoin tumbled 4.8%.

S&P Global said it would not change the eligibility requirements for its major indices, which effectively rules out a swift entry for Elon Musk's SpaceX to the benchmark S&P 500 after it goes public in what would be the world's biggest initial public offering.

S&P Dow Jones Indices will announce the results following its rebalancing after markets close. Chipmaker Marvell Technology, which boasts over $270 billion in valuation, is among the contenders to be added to the benchmark index.

Declining issues outnumbered advancers by a 2.8-to-1 ratio on the NYSE. There were 108 new highs and 196 new lows on the NYSE.

On the Nasdaq, 1,155 stocks rose and 3,548 fell as declining issues outnumbered advancers by a 3.07-to-1 ratio.

The S&P 500 posted 14 new 52-week highs and three new lows while the Nasdaq Composite recorded 76 new highs and 143 new lows.

(Reporting by Stephen Culp; Additional reporting by Medha Singh and Twesha Dikshit in Bengaluru; Editing by Rod Nickel)

Copyright Reuters or USA Today Network via Reuters Connect.

This story was originally published June 5, 2026 at 2:40 PM.