Why the Nasdaq plummeted: the jobs report that crashed Wall Street

The U.S. economy added 172,000 jobs in May. Unemployment held steady at 4.3%. On any other day in the past few years, that would be cause for celebration. On Friday, it triggered one of Wall Street's worst selloffs in over a year.

The Nasdaq Composite dropped 4.18%, closing at 25,709 — its steepest single-day decline since the tariff turmoil of early 2025. The S&P 500 fell 2.64%, snapping a nine-week winning streak. The Dow shed nearly 700 points. In total, the semiconductor sector alone wiped roughly $1 trillion in market value.

Economists had forecast about 80,000 to 85,000 new jobs for May — already a conservative bar set partly because a slowdown in immigration has lowered the breakeven rate the economy needs to maintain stable unemployment. The actual number came in at more than double expectations. That surprise sent a single, chilling message to bond markets: the Federal Reserve is not cutting rates anytime soon.

The 10-year Treasury yield jumped above 4.5%. The 30-year crossed 5% — a psychologically significant threshold that revived fears about borrowing costs for the capital-intensive companies fueling the AI buildout. Money markets quickly repriced, now reflecting roughly a 60% probability that the Fed's next move will actually be a rate hike before the end of 2026.

Higher yields are kryptonite for richly valued growth stocks. When investors can earn 5% risk-free on a 30-year Treasury, the future profits promised by high-multiple tech names look considerably less appealing — and the Nasdaq is packed with exactly those names.

The bond market didn't act alone. The selloff had been building since Wednesday night, when Broadcom (AVGO) reported earnings that disappointed investors not for being bad, but for failing to be spectacular enough. Specifically, Broadcom declined to raise its AI chip revenue outlook — a signal that the feverish pace of AI infrastructure spending may be plateauing, or at least pausing for breath.

That hesitation sparked a broader reassessment of the AI trade that had powered much of this year's market rally. By Friday, it turned into a rout. Nvidia fell 6.2%. Intel dropped 11.3%. Micron lost 6.3%. Marvell Technology slid 8%. Advanced Micro Devices fell another 6.3%. Broadcom itself shed an additional 7.6% on top of Thursday's losses. Meta Platforms dropped 5.5%.

At the heart of the selloff lies a growing tension: the AI buildout is enormously expensive, and it runs on cheap capital. Microsoft committed $80 billion in annual capex. Meta guided $125–145 billion. Alphabet just raised $80 billion in equity. Nvidia's customers spend over $300 billion annually on GPU clusters and data centers. When the 30-year Treasury yield climbs above 5%, the cost of financing all of that changes dramatically — and so do the valuations of every company in the chain.

Investors didn't need a reason to sell. They needed a reason to stop buying. Friday's jobs report provided it.

As tech collapsed, investors moved methodically into defensive names. Colgate-Palmolive gained 4%. Coca-Cola rose more than 3%. Johnson & Johnson added 2%. Healthcare, consumer staples, and utilities — sectors whose earnings don't depend on a rate-cut cycle — attracted the capital fleeing high-multiple growth stocks. It was a textbook risk-off rotation.

The dollar climbed to an eight-week high. Gold, paradoxically, dropped 3.6% — a sign that investors are liquidating everything to raise cash rather than fleeing into traditional safe havens.

Friday's drop ended a nine-week winning streak for the S&P 500 and delivered the Nasdaq's worst single session since April 2025. But it also raises a question that will define the second half of 2026: if the economy is this strong, can the AI trade survive without the Fed's help?

The SpaceX IPO — priced at roughly $1.77 trillion and scheduled to price on June 11 — now faces a choppier market. Institutional investors who would anchor that deal watched their tech portfolios shed 4% in a single session. Pricing adjustments may follow.

For now, the message from bond markets is unambiguous: good news is bad news. A resilient economy means higher-for-longer rates. And higher-for-longer rates are the Nasdaq's least favorite sentence.