Wall Street Retreats as Jobs Data Fuels Rate Hike Fears

A surging labor market has collided with cooling tech sentiment, pushing major indexes downward as investors brace for aggressive Federal Reserve intervention. The U.S. economy added 172,000 jobs in May, shattering expectations and signaling that the central bank’s campaign to curb inflation faces a long, volatile road ahead.

The sharp disconnect between analyst forecasts of 85,000 new roles and the reality of 172,000 additions has pushed the probability of a year-end interest rate hike to 98%. Markets are now fixated on the upcoming Federal Reserve meeting, the first to be presided over by new Chair Kevin Warsh. The shift in monetary policy expectations hit semiconductor giants particularly hard, with Nvidia leading a broad sell-off among chipmakers that dragged down the tech-heavy benchmarks.

While the semiconductor sector struggled, capital rotated into safer havens, lifting the consumer staples index and six other S&P 500 sectors. Corporate performance remained disparate: Lululemon issued a profit warning that rattled retail investors, while Cooper Companies posted robust earnings, underscoring the uneven landscape. Beyond domestic data, investors remain skittish over stalled U.S.-Iran negotiations and the potential for Middle East conflicts to further exacerbate inflationary pressures.