The massive months-long rally in US stocks took a painful turn on Friday as traders rushed to dump mega-cap technology stocks and snap up more defensive names, while the latest employment data boosted expectations for an interest-rate hike this year.
The Nasdaq 100 Index closed 4.8 per cent lower, netting the tech-heavy gauge its biggest drop since April 2025.
Before Friday’s session, it had surged more than 30 per cent since March 30 as strong earnings propelled chipmakers and artificial-intelligence companies.
“Today’s NDX move seems to be a combination of profit-taking, cash-raising ahead of IPOs, bitcoin weakness, and interest rate sensitivity,” said Rocky Fishman, strategist and founder at Asym Research.
Meanwhile, the S&P 500 Index fell 2.6 per cent as the benchmark missed out on a 10th-straight week of gains, which would have been the longest such stretch since 1985. Despite the sharp decline, five of 11 sectors rose on the day, led by consumer staples and utilities.
The shift out of technology names, particularly those tied to AI, has defined the market over the last few sessions.
A disappointing forecast from Broadcom and a rise in interest-rate hike bets has sapped enthusiasm. Meta added to the pain, with the Facebook parent slumping 5.5 per cent after the Financial Times reported that is considering raising equity.
Investors want to know “why companies with some of the best business models in the history of capitalism need to raise equity,” said Adam Crisafulli of Vital Knowledge. “If Google and Meta can’t fund the AI bonanza with internal cash flow, then who possibly can?”
Information technology stocks on the S&P 500 slid 5.8 per cent and UBS Group AG’s basket of AI winners tumbled 7.0 per cent, with NuScale Power, Oklo and Marvell Technology among its biggest decliners.
“Tech stocks got way ahead of themselves and now it’s hard to justify buying these shares at these lofty valuations,” said Jeff Buchbinder, chief equity strategist at LPL Financial.
US job growth topped all forecasts and the unemployment rate held steady in May. Data from the payrolls report provides the clearest sign yet that the labour market may be breaking out of a prolonged period of lackluster hiring, even as fears of AI-related job loss persist.
To Thomas Simons, chief US economist at Jefferies, the data is a “nail in the coffin” for interest-rate cuts this year. Treasury yields climbed after the report was released, and traders fully priced in a quarter-point rate hike by the Fed by December, according to data compiled by Bloomberg.
“The economy is growing and evolving in such a way that there is almost no chance of a cut in 2026,” Simons wrote in a note to clients on Friday.
“If energy prices correct to the downside and productivity gains lead to reduced inflation expectations in 2027, then the discussion of rate cuts can begin again.”
Traders were also keeping an eye on the Middle East. The US and Iran have made little progress in talks over an interim peace deal this week, with the nations having their worst clashes since the ceasefire began in April.
Fighting between Israel and Hezbollah in Lebanon also continued, despite President Donald Trump’s insistence that the two sides would stop hostilities. Tehran has insisted on a ceasefire in Lebanon before accepting a deal that will extend a truce by two months and reopen the Strait of Hormuz.
