US stocks tumbled Friday, with the NASDAQ leading declines amid rising Treasury yields and concerns over Federal Reserve rate cuts. Meta's potential equity offering adds to tech sector volatility.
Market Overview
The NASDAQ Composite Index closed 4.18% lower on Friday, marking its steepest drop since April 2025, as rising Treasury yields and robust US employment data spooked investors. The S&P 500 fell 2.65%, and the Dow Jones Industrial Average dropped 1.35%, reflecting broad market weakness.
Catalyst for Decline
The selloff was triggered by stronger-than-expected US nonfarm payrolls, which rose 172,000 in May—well above the 85,000 forecast. Revisions added 93,000 jobs to prior months, reigniting fears that the Federal Reserve may delay interest rate cuts. The 2-year Treasury yield jumped 11.3 basis points, while the 10-year yield rose 6.7 basis points, pressuring growth stocks.
Tech Sector Volatility
Meta's reported equity offering to fund AI infrastructure intensified selling pressure, following Alphabet's $85 billion raise earlier this week. This trend suggests tech giants are relying more on equity financing amid soaring capital expenditures, raising questions about sustainability.
Technical and Fundamental Context
Prior to Friday's drop, the S&P 500 had risen for nine straight weeks, and the NASDAQ had only one negative week since March. Despite the correction, many AI and semiconductor stocks remain up over 100% year-to-date, signaling speculative excesses. The market's vulnerability stems from stretched valuations and mixed signals on inflation and growth.
Implications for Forex Traders
The dollar strengthened against major currencies as higher yields boosted demand for the greenback. Risk sentiment soured, with safe-haven flows favoring the USD. Forex traders should monitor the DXY for further momentum, while EUR/USD and GBP/USD may face pressure. Central bank divergence remains key, with the Fed's policy path uncertain amid sticky inflation.
Political and Policy Risks
With midterm elections looming, the Trump administration faces pressure to address market volatility. Rising energy costs and inflation complicate policy responses, narrowing the Fed's options for stimulus. A prolonged correction could erode political confidence in economic management.
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