Good morning,
Wall Street's historic run ended hard on Friday. Here's what you need to know.
The Tape The S&P 500 fell 2.64% to 7,383.74. The Nasdaq dropped 4.18% to 25,709.43, its worst day since April 2025. The Dow lost 695 points (1.35%) to 50,866.78. Chips took the worst of it... the PHLX Semiconductor Index sank 8.71%.
Why It Happened Strong jobs data, of all things. Payrolls rose 172,000 in May, more than double the roughly 80,000 expected, with unemployment steady at 4.3%. Good news became bad news fast... traders are now fully pricing in a Fed rate hike by year-end. Yields confirmed the stress, with the 10-year jumping above 4.5% and the 30-year above 5%.
The Big Story This was a chip-led wreck. Nvidia fell about 6%, Broadcom nearly 8%, and Meta dropped 5.5% as investors finally questioned sky-high AI valuations. The pain spread overnight too... South Korea's Kospi closed down 5.54%, with SK Hynix off nearly 10%.
Where the Money Went Not all of it left. Investors rotated into safety: Colgate gained 4%, Coca-Cola over 3%, and Johnson & Johnson 2%. Small caps actually rose, with the Russell 2000 up 1.45%.
Bottom Line A 10-week melt-up met a strong labor market and a hawkish Fed, and the most stretched corner of the market broke first. Next week's inflation data decides whether this was a healthy shakeout or something bigger.
-Greg
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