Stronger-than-expected U.S. jobs data for May prompted Wall Street to reassess the Federal Reserve's interest rate path. As a result, U.S. stocks opened lower on Friday, Treasury yields rose in tandem, and technology stocks faced more significant pressure.
Non-farm payroll data exceeded expectations
Data shows that the U.S. added 172,000 non-farm jobs in May, significantly higher than the market expectation of 80,000. The unemployment rate was 4.3%, in line with expectations.
This data suggests that the US labor market remains resilient, cooling market expectations for a near-term rate cut. Traders subsequently increased their bets on another rate hike this year.
US Treasury yields rise rapidly
Following the release of the employment data, U.S. Treasury bonds experienced a sell-off, with yields across major maturities generally rising.
- The 10-year US Treasury yield rose above 4.5%.
- The 30-year US Treasury yield rose above 5%.
- The yield on 2-year US Treasury bonds also rose significantly.
Rising yields mean that financing costs may remain high, while also increasing the attractiveness of fixed-income assets and putting more pressure on risky assets such as stocks.
Technology stocks dragged down major stock indices
After the market opened on Friday, the S&P 500 fell by about 1%, the Nasdaq Composite fell by about 1.6%, and the Dow Jones Industrial Average fell by about 150 points, or about 0.3%.
Technology stocks led the decline, with semiconductor stocks continuing to weaken. Marvell Technology once fell more than 8%, and Micron Technology fell about 6%. Over the past year, chip stocks have been a major driving force behind the rise of US stocks, and the current correction has amplified the pressure on the index.
However, the market is not entirely weak. Some funds are still flowing into sectors such as finance, healthcare, industrials, and consumer goods, indicating that investors are more likely adjusting their portfolios rather than withdrawing from the stock market altogether.
Looking at weekly performance, the S&P 500 is likely to record its first weekly decline in nearly ten weeks, while the Nasdaq is down nearly 2% this week. Short-term market volatility may continue to amplify after employment data altered interest rate expectations.
