Wall Street Retreats as Jobs Data Fuels Rate Hike Expectations

A sharp spike in nonfarm payrolls to 172,000 for May has rattled U.S. markets, sending Treasury yields climbing and forcing traders to price in a 25-basis-point interest rate hike by the Federal Reserve before the year ends, effectively cooling the recent appetite for riskier tech assets.

The labor market figures significantly outpaced the 85,000 forecast, signaling a resilience that complicates the Federal Reserve’s path forward. As Treasury yields surged, the broader market felt the weight of tighter monetary policy prospects, with the Nasdaq and S&P 500 suffering their most pronounced monthly declines since March.

Chipmakers led the selloff, marking a third straight session of losses for the tech sector. While growth-heavy stocks faltered, the defensive rotation was evident as investors sought shelter in consumer staples. This market shift occurs just as Kevin Warsh prepares to preside over his inaugural policy meeting as the new Fed Chair, an event now under intense scrutiny for signals on how the central bank will balance this unexpected economic heat against the ongoing desire to curb inflation.