Wall Street ends sharply lower as chips slide, jobs data fuels rate hike fears

Wall Street's extended rally came to an abrupt halt on Friday, with major stock indexes closing sharply lower and snapping a nine-week winning streak. The downturn was particularly pronounced in the technology sector, with chip stocks experiencing their most significant daily decline of the year.

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After the record run we’ve seen the last nine weeks in equities, specifically tech and semiconductors, the dam just broke today.

The catalyst for the sell-off appeared to be a robust May jobs report. The US economy added 172,000 jobs, more than double analyst expectations, while the unemployment rate held steady at 4.3 percent. While this indicated economic health, it diminished hopes for an imminent interest rate cut by the Federal Reserve.

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Obviously, the stronger-than-expected jobs report puts the Fed in a tough spot regarding any interest rate cut for the rest of the year. And the market is throwing a fit by hitting the big winners so far this year.

Market participants are now pricing in a higher probability of a rate hike by the Fed's December meeting. This shift in expectations, coupled with lingering concerns about the Middle East conflict and potential energy price inflation, weighed heavily on investor sentiment.

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The market reaction today was more driven by positioning rather than fundamentals.

Several prominent companies saw significant drops. Nvidia, the market's largest company by value, fell sharply, as did competitors like Intel, Micron, AMD, and Broadcom. Lululemon Athletica also slumped after revising its annual profit forecast downward. Conversely, Cooper Companies saw gains after exceeding second-quarter earnings estimates. Cryptocurrency firms like Coinbase and Strategy were pulled lower by a sharp drop in Bitcoin.

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The semiconductor sector was way overbought. That’s why we’re seeing the selloff. I don’t think it’s the end of the semi bull market.