Wall Street’s historic weekly run came to a halt, with stocks hit by a tech selloff and higher bond yields as a solid jobs report added to bets the United States Federal Reserve ’s next rate move will be a hike.

The repricing of the Fed outlook took hold as markets also reassessed the artificial-intelligence trade that had led a surge from this year’s lows. Growing anxiety about valuations sent the S&P 500 down 2.4 per cent, with the index failing to complete a 10th straight week of gains. The Nasdaq 100 sank four per cent, the most since April 2025. A gauge of chipmakers slid nine per cent. Meta Platforms Inc. sank 5.5 per cent as the Financial Times said the firm is weighing a share sale.

In Toronto, the S&P/TSX Composite Index was down 803.61 points at 34,413.45.

The concerted selloff in stocks, bonds and crypto was the biggest setback in months for the latest leg of the bull market, which traces to the end of March when negotiations began in earnest to end war in Iran. Concern has grown recently about the sustainability of an AI-fueled rally that had pushed the Philadelphia Semiconductor Index toward its best quarter ever and made trillion-dollar behemoths out of chipmakers Micron Technology Inc. and Samsung Electronics Co.

The tech selloff also followed an impressive earnings season for AI companies, with investors questioning whether growth rates have peaked, according to Mark Hackett at Nationwide.

“We find ourselves facing another strong pullback in tech,” said veteran strategist Louis Navellier. “It appears to be a case of profit-taking in the semiconductors. Also hitting the market today are higher interest rates. It’s due to very strong job data, lowering expectations for a Fed rate cut.”

While there was a lot to like in Friday’s economic data, the figures came at a time when inflation risks are challenging the Fed. Treasury two-year yields jumped 11 basis points to 4.16 per cent. Swaps are fully pricing in a rate increase by the end of 2026. The dollar rose. Bitcoin slid below US$60,000.

U.S. job growth topped all forecasts in May and the unemployment rate held steady at 4.3 per cent, offering the clearest sign yet that the labor market may be breaking out of a prolonged period of lackluster hiring.

“Today’s upside surprise underscores ongoing economic resilience, but it will also likely keep the Fed — and the markets — focused on inflation pressures,” said Ellen Zentner at Morgan Stanley Wealth Management.

The market may be treating today’s good economic news as bad news for equity prices, but this is a knee-jerk reaction as bond markets reprice the Fed path, according to Neil Dutta at Renaissance Macro Research.

“Ultimately, if the Fed is hiking because of expanding employment, I would not necessarily assume it is bad for the stock market outlook,” Dutta said. “Stagflation is bad for stocks, an inflationary boom is not.”

Swaps indicated traders expect a quarter-point increase in the U.S. central bank’s target for the federal funds rate by the December policy meeting, with a roughly 60 per cent chance of a move in October. Fed officials next meet June 16-17 under the leadership of new chairman Kevin Warsh.

“If chair Warsh pushes for cuts at his first meeting, he will be pushing against the evidence,” said Seema Shah at Principal Asset Management. “Our base case remains that the Fed stays on hold through 2026, but if employment data continues to track around May’s pace, rate hikes this year would come firmly into play.”

Bloomberg.com

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