Nasdaq Posts Worst Day Since April 2025 as Rate-Hike Fears Grip Wall Street

US equities suffered their worst session of the year Friday after stronger-than-expected jobs data reignited Federal Reserve rate-hike fears, CNN reported. The Nasdaq Composite plunged more than 4%, marking its steepest single-day decline since April 2025. Semiconductor and AI-linked names bore the brunt of the selling.

Indexes Post Steep Losses Across the Board

The S&P 500 shed 2.64%, its sharpest decline since October. The drop ended a nine-consecutive-week winning streak for the benchmark index. The Dow Jones Industrial Average, less exposed to technology, fell roughly 695 points, or about 1.35%. It was the Dow’s worst day in approximately three months.

Wall Street’s anxiety gauge, the CBOE VIX, surged around 40% and reached a two-month peak. The broad selloff extended to bonds and commodities. The 10-year Treasury yield climbed to 4.54%, a level that historically pressures equity valuations.

What the Jobs Report Triggered

The Bureau of Labor Statistics reported the US economy added 172,000 jobs in May. That figure easily topped analyst forecasts. Combined with recent evidence of inflation rising amid elevated oil prices tied to the Iran conflict, the data shifted market expectations sharply.

Traders now assign roughly a 43% probability to a Fed rate increase in December, up from 26% one month ago, according to CME FedWatch data. James McCann, senior economist for investment strategy at Edward Jones, wrote in a note that the data effectively removes Fed easing from the table this year, with markets now pricing the possibility of the next move being a hike rather than a cut.

Background: A Fragile Rally Meets a Policy Shift

US equities had staged a sustained recovery over the past two months, fueled largely by enthusiasm around artificial intelligence investment. That run had pushed valuations in semiconductor and AI infrastructure names to elevated levels. Any upward reassessment of the Fed’s terminal rate carries outsized risk for those high-multiple stocks.

Fed Chair Jerome Powell and colleagues have maintained a data-dependent stance throughout 2026. The May payrolls beat gives the committee additional reason to hold rates higher for longer, undermining the soft-landing narrative that underpinned the prior rally.

Risk Assets Sold Broadly

The risk-off move swept beyond equities. Gold fell more than 3.5%, an unusual decline for an asset typically treated as a safe haven. The broad retreat across asset classes underscored the scale of the repricing underway as traders recalibrate expectations for the remainder of 2026.

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