Friday's chip selloff wiped over $1 trillion from semiconductor stocks after a blowout May NFP report sent Treasury yields surging and pushed rate-hike odds to 70% -- the Nasdaq's worst session since April 2025.

TL;DR

  • May nonfarm payrolls rose by 172,000, more than double the Dow Jones consensus estimate of 80,000, signaling that the U.S. labor market is far stronger than expected.
  • The 10-year Treasury yield surged to 4.544%, its highest level since May 21, and the probability of a Federal Reserve rate hike by year-end climbed to 70% per the CME FedWatch tool.
  • Nvidia erased roughly $280 billion in market value; Broadcom, Taiwan Semiconductor Manufacturing Company, and Micron Technology each lost over $100 billion.
  • The Nasdaq posted its worst session since April 2025, falling roughly 4%, as the S&P 500 snapped a nine-week winning streak.

As of the close on Friday, June 5, U.S. equities finished sharply lower after a blowout jobs report and a sweeping selloff in semiconductor stocks hit markets from two directions at once. The Nasdaq suffered its biggest single-day decline since the tariff turmoil of April 2025. Over $1 trillion in chip-sector market value evaporated. And the rate outlook shifted fast: traders are now pricing a meaningful probability of a Federal Reserve hike before year-end rather than a cut.

What happened in the chip selloff and jobs report

The Bureau of Labor Statistics released the May employment situation report at 8:30 a.m. ET. Nonfarm payrolls rose by 172,000, compared with a Dow Jones consensus estimate of 80,000. The unemployment rate held at 4.3%. Leisure and hospitality led all sectors with 70,000 new jobs, well above the 14,000 monthly average over the prior year, according to CNBC.

Treasury yields moved sharply within minutes. The 10-year yield climbed more than 6 basis points to 4.544%, its highest level since May 21. The 2-year yield, which tracks Federal Reserve policy expectations most closely, rose more than 11 basis points to 4.162%, its highest level since February 2025. The 30-year bond yield reached 5.007%. One basis point equals 0.01 percentage points.

That rate-sensitive backdrop accelerated a selloff already building in semiconductor stocks. Broadcom's weaker-than-expected earnings earlier in the week had put the chip sector on edge. On Friday, caution turned into a broad rout. Nvidia shed roughly $280 billion in market value in a single session. Broadcom, Taiwan Semiconductor Manufacturing Company (TSMC), and Micron Technology each lost more than $100 billion. Advanced Micro Devices (AMD) fell sharply as well, according to Reuters and Channel News Asia.

Total losses across U.S.-traded chipmakers exceeded $1 trillion, Reuters reported. Wells Fargo chief equity strategist Ohsung Kwon told Yahoo Finance that the sector had been "way overbought" and that Friday's selloff was "more driven by positioning rather than fundamentals."

Why markets moved

Two forces worked together. The first was the jobs report. A reading that doubles consensus is rare, and it removes the primary argument for near-term rate relief. The CME FedWatch tool showed the probability of a Fed rate hike by the end of 2026 rising to 70% after the data. When investors reprice the Fed from neutral to potentially hawkish, rate-sensitive sectors like technology absorb the first and sharpest impact.

The second force was sector-specific. Semiconductor stocks had rallied sharply over the prior nine weeks, and Broadcom's miss was the first sign that AI chip demand narratives might be running ahead of actual numbers. Friday's NFP print removed any cushion from that divergence. Higher yields make future cash flows worth less today, which matters most for high-multiple growth stocks. For Nvidia, which trades at a valuation that prices in years of strong outperformance, a 70% rate-hike probability is a direct and meaningful headwind.

Oil offered a calmer backdrop. Brent crude edged to roughly $95.01 per barrel on Friday after losing nearly 2.84% on Thursday. WTI held near $93.17, essentially flat on the day, per CNBC. The relative stability in crude reflected continuing uncertainty over the U.S.-Iran conflict. Hezbollah's rejection of a new Lebanon ceasefire earlier in the week had kept a geopolitical premium in place without triggering a fresh escalation. At ChartDojo, our coverage through the conflict has tracked how quickly energy markets reprice when diplomatic headlines shift -- the Strait of Hormuz, which handles roughly one-fifth of global oil flows, remains a live tail risk. For context on how oil moved when ceasefire optimism peaked in late May, see our earlier piece on oil's drop toward $87 as Iran peace talks progressed.

Implications for the most impacted trader cohorts

Technology and semiconductor traders: The Nvidia position unwind that started after Broadcom's earnings became a sector-wide event on Friday. Traders holding chip names into the weekend face the question of whether $1 trillion in losses represents a flush or just the start of a deeper correction. Positions built on AI demand growth will need to be re-evaluated against a higher-rate environment where the bar for justifying premium multiples rises sharply.

Index and futures traders: The S&P 500's nine-week winning streak was tied partly to the same tech-driven optimism now under pressure. Index traders should watch whether the pullback stays concentrated in semiconductors or begins spreading into other high-multiple growth sectors. If the 2-year yield holds above 4.1%, the rate-driven pressure on growth stocks is unlikely to reverse quickly.

Fixed income and macro traders: The 2-year yield reaching its highest level since February 2025 is a significant data point. The curve move signals that markets are rapidly removing the idea of a rate cut this year and starting to price a possible hike. That kind of repricing often has more room to run than the initial move suggests, particularly when a jobs beat of this magnitude catches consensus badly off-guard.

Oil and energy traders: The Iran backdrop keeps Brent and WTI elevated relative to global growth conditions. WTI gained more than 6% across the full week. Friday's stability does not signal resolution. Any breakdown in the U.S.-Iran negotiation framework, or a fresh escalation in Lebanon, would likely push crude higher again quickly.

Potential positives vs negatives

  • Positive: A resilient labor market can sustain consumer spending and corporate earnings well beyond the tech sector. The Dow Jones had closed at an all-time record high on Thursday, reflecting genuine strength in non-tech parts of the economy.
  • Positive: Friday's selloff may flush out the speculative positioning that built up during the nine-week rally, creating a cleaner setup for longer-term holders once the rate picture clarifies.
  • Negative: A 70% probability of a rate hike by year-end is a headwind for the entire growth equity complex, not just semiconductors. Pressure spreading into software, biotech, and other rate-sensitive segments is a real risk in the weeks ahead.
  • Negative: If Broadcom's miss reflects broader softness in AI capital spending rather than company-specific factors, the fundamental case for chip stock valuations weakens and Friday's losses may not represent the bottom.
  • Negative: The combination of higher yields, oil near $95, and a potentially hawkish Fed leaves limited room for a positive surprise to rescue sentiment quickly.

What could happen from here

Base case: The chip sector stabilizes after Friday's flush but does not recover meaningfully until the Fed provides clearer guidance at its next meeting. The Nasdaq stays under pressure while tech valuations adjust to the new yield environment. Oil holds in the low-to-mid $90s as the Iran negotiation continues without resolution. Confirms: 2-year yield stays above 4.1%, no further chip earnings disappointments emerge, and Iran talks stall without collapsing. Invalidates: a Fed speaker explicitly rules out hikes, or a major chip company reports blowout numbers that override the macro concern.

Upside case: Fed officials signal in early-week commentary that one strong jobs report alone is not enough to trigger a hike, and markets walk back the 70% probability. Chip stocks partially recover as the positioning-driven nature of Friday's decline becomes clearer. Oil eases if Iran-related headlines improve. Confirms: FedWatch rate-hike odds drop below 50%, Brent pulls back below $92, and the Nasdaq stabilizes early next week. Invalidates: additional Fed voices endorse the hawkish read of today's data, or chip stocks see follow-through selling Monday.

Downside case: Next week's CPI print comes in hot, confirming Friday's NFP was not a one-off and that the Fed must act. Chip stocks face a second wave of selling as institutional holders reset exposure. Oil spikes on a fresh geopolitical development at the Strait of Hormuz or in Lebanon. Confirms: CPI accelerates above 3.5%, chip sector indices break below their 200-day moving averages, and WTI returns above $96. Invalidates: CPI cools materially, Iran ceasefire progress resumes, and chip stocks find support at Friday's closing levels.

What to watch next (next 24 hours)

  • Fed speakers over the weekend and early next week for any signal about how policymakers are reading Friday's jobs data and whether the 70% rate-hike probability looks warranted.
  • Whether CME FedWatch rate-hike probabilities continue to rise above 70% or begin to fade as the initial shock is absorbed.
  • Nvidia and AMD pre-market indications on Monday morning as the first read on whether institutional holders are adding to or reducing chip exposure after Friday's rout.
  • Any fresh development in U.S.-Iran negotiations or Lebanon ceasefire talks, which would move oil quickly in either direction.
  • Whether the 2-year Treasury yield holds above 4.15% as a barometer of how fully the market has repriced Fed policy.

FAQ

What does a hot jobs report mean for interest rates? A stronger-than-expected payrolls print suggests the economy does not need the Federal Reserve to cut rates to remain healthy. When job growth outpaces forecasts by a wide margin, as it did today, traders typically reprice the probability of future rate cuts lower and sometimes, as happened Friday, start pricing the possibility of hikes instead. That shift pushes bond yields higher and weighs on stocks whose valuations are most sensitive to borrowing costs.

Why do higher interest rates hurt semiconductor stocks? High-growth stocks like chipmakers typically trade at elevated price-to-earnings multiples because investors are pricing in strong profit growth many years into the future. When interest rates rise, the present value of those future profits falls. Money promised years from now is worth less today when you can earn a higher return by holding bonds. That math is especially unfavorable for the most richly valued chip names, which is why Nvidia, TSMC, and their peers bore the sharpest losses today.

Sources

This market note is for education only. It is not financial advice.

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