Following stronger-than-expected U.S. job growth in May, the market quickly adjusted its assessment of the timing of a Federal Reserve rate cut. Rising U.S. Treasury yields weighed on risk assets, with technology stocks leading the decline and major stock indices falling in tandem.

May employment figures exceeded expectations.

Data shows that U.S. employers added 172,000 jobs in May, exceeding market expectations. The continued resilience of the job market indicates that the U.S. economy has not yet shown significant signs of cooling.

With inflation still a major concern, this type of data, while reflecting a sound fundamental outlook, may reinforce the market's perception that interest rates will remain high.

Expectations for interest rate cuts have cooled significantly.

Following the release of the jobs report, investors repriced the Federal Reserve's policy path. Market concerns abound that if the economy and employment remain strong, the Fed's room for interest rate cuts in the near term will be limited.

As a result, the yield on the 10-year U.S. Treasury note rose to 4.54%. Rising yields typically mean higher financing costs and put pressure on stock valuations.

• The S&P 500 fell 1%.
• The Nasdaq index fell 1.6%.
• The 10-year US Treasury yield rose to 4.54%.

The technology sector is under greater pressure.

Technology stocks were among the worst-performing sectors that day. Following a rise in long-term interest rates, the market tends to lower its valuations of future earnings, making growth companies more vulnerable.

This also reflects that strong economic data does not always boost the stock market. When data alters expectations for monetary policy, investors pay more attention to the interest rate outlook and valuation pressures.