US stocks moved lower on Friday as investors weighed a stronger-than-expected May jobs report, rising Treasury yields, and renewed pressure across chip stocks. The S&P 500 and NASDAQ Composite fell as technology shares extended losses, while the Dow Jones Industrial Average moved between small gains and losses.

The market reaction followed data showing that US employers added 172,000 jobs in May. This figure came in well above forecasts, while the unemployment rate held steady at 4.3%. The report pushed Treasury yields higher and raised expectations that the Federal Reserve may keep policy tighter for longer.

Jobs Report Pushes Yields Higher

The Bureau of Labor Statistics reported that nonfarm payrolls rose by 172,000 in May. Economists had expected a much smaller increase, with forecasts ranging from 80,000 to 88,000. Meanwhile, April’s payroll gain stood at 115,000.

The unemployment rate remained unchanged from April at 4.3%, matching expectations. However, the stronger hiring data changed the tone across markets. Traders moved to price in a higher chance of a Federal Reserve rate hike before year-end, according to CME FedWatch data.

Treasury yields climbed after the report. The 10-year yield moved above 4.5%, while the 30-year yield rose above 5%. Additionally, the two-year yield, which tracks near-term rate expectations, climbed above 4.1%.

Chip Stocks Lead Market Decline

Technology shares came under fresh pressure as chip stocks extended their recent sell-off. Broadcom fell again on Friday after a steep drop on Thursday. Marvell Technology, Micron Technology, NVIDIA, AMD, and Intel also traded lower.

The Philadelphia Semiconductor Index dropped more than 5% during early trading. Notably, the weakness followed a strong rally in chip stocks earlier this year, driven by demand tied to artificial intelligence, data centers, and computing infrastructure.

Broadcom’s results added pressure to the sector after investors reacted to its outlook. Meanwhile, Marvell fell sharply, even as it remained among companies watched for possible S&P 500 index inclusion. Micron also declined as traders reduced exposure to semiconductor names.

Rate-Hike Fears Weigh on Wall Street

The strong labor report shifted focus back to Federal Reserve policy. Markets had recently debated when the Fed could cut rates. However, Friday’s data raised questions about whether officials may need to hold rates higher or even consider another hike.

Stephen Coltman, head of macro at 21Shares, warned that the policy debate may be changing. “With the inflation and employment data where they are now, the debate is quickly moving on from ‘when will the Fed be able to cut’ to ‘why isn’t the Fed hiking?!’”

He also said a move from a dovish stance to a hawkish stance could be hard for markets to absorb. However, that view reflects one market reading of the data, while officials have not yet made their next policy decision.

Mark Malek, Chief Investment Officer at Siebert Financial, offered a more measured view of the labor market. “You're not talking about a labor market that's doing fabulous, but you're also not looking at a labor market that's completely crumbling.”

Investors Rotate Away from Tech

Several areas outside technology showed better performance as investors moved into other sectors. Consumer staples led gains among major S&P 500 groups, while six of the 11 sectors traded higher during part of the session.

On Thursday, the Dow closed at a record high, supported by gains outside the technology sector. However, the NASDAQ slipped as investors continued to rotate away from high-growth and semiconductor-linked stocks.

Charles Kantor, senior portfolio manager at Neuberger Wealth, said demand tied to compute and data centers remains strong over the long term. Even so, Friday’s selling showed that investors are reassessing crowded trades after a sharp run.

Weekly Winning Streak Comes Under Pressure

The S&P 500 remained on track for its first weekly decline in 10 weeks. The NASDAQ also moved toward a weekly loss of roughly 2%, while the Dow stayed on course for a small weekly gain.

Declining stocks outnumbered advancers on both the New York Stock Exchange and the NASDAQ. Meanwhile, Lululemon shares fell after the company cut its annual profit forecast, while Cooper Companies rose after beating second-quarter estimates.

Geopolitical concerns also remained in focus. Talks between the US and Iran stayed stalled heading into the weekend, adding another layer of caution for investors as markets digested jobs data, yields, and the renewed sell-off in chip stocks.

Also Read: Micron Crosses $1 Trillion Valuation as AI Infrastructure Spending Accelerates