NEW YORK: Wall Street’s main indexes fell on Friday as stronger-than-expected jobs data pushed Treasury yields higher and reinforced hawkish policy bets, while chipmakers slid after a recent rally.
Nonfarm payrolls rose by 172,000 jobs in May after 115,000 additions in April. The increase was much higher than the 85,000 forecast by a Reuters survey of economists.
Yields on US Treasuries, which move inversely to prices, jumped as traders factored in with near certainty that the US Federal Reserve will hike interest rates by 25 basis points before the end of the year. Money markets had expected a 60 percent chance of tightening before the data.
The data comes ahead of new Fed Chair Kevin Warsh’s first policy meeting later this month, as he takes charge of an economy grappling with elevated inflation, partly exacerbated by the US-Israeli war against Iran.
“People are pricing in 100 percent probability of a Fed hike later this year. So that’s pushing rates markets higher and giving some people reason to take chips off the table,” said Charlie Ripley, senior investment strategist for Allianz investment management. “There’s been a pretty tremendous run in equities.”
Nvidia, the largest company by market value, lost 2.5 percent, while the Philadelphia chip index shed 5 percent following a blistering 92 percent surge so far this year.
Gains in semiconductor stocks were instrumental in Wall Street’s recovery from March lows to record highs. A temporary ceasefire in the Middle East and strong earnings growth also supported the advances.
Tech shares declined for a third straight session, falling 2.7 percent.
Six of 11 major S&P 500 indexes moved higher, with consumer staples leading the gains, as investors rotated money into other sectors.
At 11:52 a.m. the Dow Jones Industrial Average fell 281.15 points, or 0.55 percent, to 51,280.78, the S&P 500 lost 106.11 points, or 1.40 percent, to 7,478.20 and the Nasdaq Composite declined by 636.64 points, or 2.37 percent, to 26,194.32.
The S&P 500 and the Nasdaq were set for their steepest monthly decline since March, while the price-weighted Dow was on track to rise for a third straight week.
Talks between the US and Iran remained stalled heading into the weekend, underscoring complications facing a peace deal to end the conflict.
Among market movers, Lululemon Athletica slumped 8 percent after the athletic apparel maker cut its annual profit forecast and projected second-quarter earnings well below Wall Street estimates.
Cooper Companies rose 8.5 percent after the maker of contact lenses beat estimates for second-quarter results.