U.S. stock markets experienced significant declines following last Friday's May jobs report, which triggered a sharp increase in Treasury yields and renewed concerns about persistent inflation potentially prompting Federal Reserve rate hikes. The Nasdaq 100 plunged 4.8% on Friday, marking its worst single-day performance since the April 2025 tariff panic, while chip stocks led the sell-off. The S&P 500 has fallen 3% from its June 2 closing record high, and the Nasdaq 100 has dropped over 5% from its peak reached the same day. The strong employment data intensified investor worries that elevated inflation might force the Fed to reverse its accommodative stance. Treasury yields, which form the foundation for consumer and corporate interest rates, tend to rise when GDP growth is solid, the job market is strong, and inflation is elevated—conditions reflected in the May jobs report.
May Jobs Report Triggers Treasury Yield Spike and Stock Sell-Off
Last Friday's surprisingly strong May jobs report generated a sharp increase in market yields on U.S. Treasurys and reignited worries that persistent inflation might mean Fed rate hikes. An ugly stock market sell-off ensued, especially among chip stocks. The Nasdaq 100's 4.8% Friday dive was its worst day since the April 2025 tariff panic. Markets have stabilized since then, though they remain on edge. The S&P 500 is down 3% from the closing record high it reached on June 2, while the Nasdaq 100 is down over 5% from its high reached the same day.
Morgan Stanley Strategist Draws 2021 Parallels on Fed Policy
Morgan Stanley chief U.S. equity strategist Mike Wilson wrote in a note this week: "In 2021, earnings growth and inflation were booming but with the Fed on hold, stocks did well. Sound familiar? The question now is can the Fed continue to downplay the inflation risks and stay on hold." Wilson added: "Given new chair Warsh's comments around AI as a potential productivity booster, we think the Fed will lean on the accommodative side at least through the mid-terms. This is exactly what the Fed did in 2021 until they could no longer ignore inflationary pressures."
Wednesday CPI Report Expected to Show 4.2% Annual Price Increase
Wednesday's CPI reading is expected to show headline prices up 4.2% in May from a year ago. If annual price increases top that number, stocks and investors may, again, run for cover.
FAQ
What caused the stock market sell-off last Friday?
A surprisingly strong May jobs report triggered a sharp increase in U.S. Treasury yields and reignited concerns about persistent inflation potentially leading to Federal Reserve rate hikes. The Nasdaq 100 fell 4.8% on Friday, its worst day since the April 2025 tariff panic, with chip stocks particularly affected.
How far have major stock indexes fallen from their recent highs?
The S&P 500 is down 3% from its closing record high reached on June 2. The Nasdaq 100 has dropped over 5% from its peak reached the same day.
What inflation data is expected on Wednesday?
Wednesday's CPI reading is expected to show headline prices up 4.2% in May from a year ago. If annual price increases exceed that number, markets may experience renewed selling pressure.
