The US stock market experienced a severe sell-off on Friday, with major indices recording their worst single-day declines in months. The sharp drop was triggered by a much stronger-than-expected non-farm payrolls report, which significantly increased market bets that the Federal Reserve will raise interest rates at its December meeting. For the week, all three major indices closed lower.
The Dow Jones Industrial Average fell 695.15 points, or 1.35%, to close at 50,866.78. The S&P 500 index dropped 200.57 points, or 2.64%, to finish at 7,383.74, marking its largest single-day percentage loss since October 2025. The Nasdaq Composite plunged 1,121.53 points, or 4.18%, to end at 25,709.43, its biggest one-day drop since April 2025.
Semiconductor stocks were hit particularly hard. The Philadelphia Semiconductor Index tumbled 10% at its worst, its largest decline since April 2025. Nvidia Corp (NASDAQ: NVDA) fell over 6%, Taiwan Semiconductor Manufacturing Co Ltd (NYSE: TSM) dropped 6.68%, Broadcom Inc (NASDAQ: AVGO) declined nearly 8%, and Intel Corp (NASDAQ: INTC) plunged more than 11%. The Nasdaq Golden Dragon China Index closed 3.56% lower.
European markets were mixed. Germany's DAX 30 index fell 0.63%, while France's CAC 40 slipped 0.32%. The UK's FTSE 100 index edged up 0.06%.
In Asia, Japan's Nikkei 225 index fell 1.31%, South Korea's KOSPI index plummeted 5.54%, and India's Sensex index declined 0.16%.
The US Dollar Index rose 0.65% to 100.068, strengthening against a basket of major currencies. The euro and British pound weakened against the dollar.
Cryptocurrencies also faced heavy selling pressure. Bitcoin briefly fell below the $60,000 level, hitting a low of $59,132.01. Ethereum dropped to a low of $1,540.21.
Oil prices retreated. The July contract for West Texas Intermediate crude fell $2.50, or 2.69%, to settle at $90.54 per barrel. The August Brent crude contract dropped $1.94, or 2.04%, to close at $93.09 per barrel.
Precious metals sold off sharply. Spot gold fell 3.29% to $4,328.20 per ounce, erasing all its gains for the year. Spot silver plunged more than 8% to $67.929 per ounce. The strong US jobs data fueled expectations of a potential Fed rate hike this year, pressuring gold as bond yields and the dollar both rose.
Key Economic Developments
The probability of a Federal Reserve interest rate hike in December surged following the release of the May jobs report. According to data from LSEG, interest rate futures now imply a 65% chance of a hike in December, up from 48% before the report. The market still widely expects the Fed to hold rates steady at its June meeting. The robust employment data indicates continued resilience in the US labor market, further diminishing expectations for near-term rate cuts and bolstering the view that the Fed may resume hiking to combat inflation.
President Donald Trump, speaking aboard Air Force One, stated he would like to see lower interest rates but will leave the decision to Fed Chair Warsh. He expressed confidence in the economy and the market. On other topics, Trump said the US had achieved great success regarding Iran, which he claimed is not in a position to have nuclear weapons, and noted the administration has various options regarding oil prices. He also mentioned a planned meeting with artificial intelligence companies next week.
Federal Reserve Governor Harker commented that a rate hike in the near term may be appropriate as the labor market appears to be in balance. She noted the unemployment rate at 4.3% is broadly consistent with her definition of full employment. While maintaining current rates is reasonable given economic uncertainty, she indicated action may be needed soon if recent trends persist.
Fitch Ratings stated in a new report that once the Strait of Hormuz reopens, the oil market will return to a state of oversupply. The agency views the strait's closure as a logistical supply shock that does not alter the market's fundamental direction. It expects a swift recovery in regional production, strong supply growth from non-OPEC countries, and potentially more aggressive OPEC policy to rekindle an oversupply situation by Q4 2026, pushing prices lower after the strait reopens. Fitch's base case, assuming a reopening around late July, forecasts an average 2026 Brent price of $87 per barrel.
Corporate News
Alphabet Inc (NASDAQ: GOOG) has signed an agreement to purchase computing power from SpaceX for $920 million per month as part of a cloud services deal running until mid-2029, according to company filings. Under the agreement, Google will pay monthly fees from October 2025 through June 2029 for access to computing resources including approximately 110,000 Nvidia GPUs, CPUs, memory, and other components. Google has the right to terminate the contract if SpaceX fails to deliver the agreed number of GPUs by September 30, 2026.
Meta Platforms Inc (NASDAQ: META) is considering raising tens of billions of dollars through a stock offering to fund its ambitious artificial intelligence plans, according to reports. Executives are exploring innovative financing options as the company plans to significantly increase AI-related capital expenditures to as much as $145 billion this year, with further increases by 2027. Discussions have intensified following Alphabet's successful $85 billion stock sale this week. Meta has not yet hired investment banks and may ultimately decide against a new share issuance, with all options reportedly still under consideration.
Several US states are reportedly considering filing a lawsuit to block Paramount Global's proposed $110 billion acquisition of Warner Bros. Discovery Inc (NASDAQ: WBD). Approximately ten states, led by California, have begun drafting a complaint and discussing legal procedures for a potential antitrust lawsuit this month. No final decision has been made on filing a suit or which states will join. Most states involved in the investigation are led by Democratic attorneys general, though at least two Republican attorneys general are also involved.
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