Stocks Get Slammed, AI Hype Cools, and Rate Hike Fears Are Back After Strong Jobs.

Wall Street just had its worst day of the year.

On Friday, the S&P 500 tumbled 2.6%, the Nasdaq cratered 4.2%, and the Dow dropped nearly 700 points. The S&P also snapped a nine-week winning streak, which is the longest run like that in years.

So what spooked everyone?

A surprisingly strong jobs report. The U.S. added 172,000 jobs in May – way more than expected. And while that’s great news for workers and the economy, investors saw it as a red flag. Why? Because a hot job market could push the Federal Reserve to raise interest rates again to fight inflation.

Suddenly, traders started betting on a December rate hike. The odds jumped from 26% a month ago to 43% now.

That hit pretty much everything. Even assets that usually act as safe havens like gold and bitcoin got crushed. Bitcoin fell below $60,000 for the first time since last October and is now down more than 50% from its all time high.

But the real pain was in AI and tech stocks.

After months of parabolic gains, AI related chips and companies sold off hard. One popular semiconductor ETF sank 15% in a single day. Broadcom issued weaker than expected guidance, and its stock dropped about 12% Thursday, then another 8% Friday. Meta fell 5.5% after reports it’s raising money to fund its AI buildout a move that made investors nervous.

“You’re pricing in basically perfection,” said one strategist. “And it doesn’t take a lot to spark a reversal.”

Even the CNN Fear & Greed Index flipped from “greed” to “fear” the first time since mid April.

Treasury yields spiked, with the 10 year yield jumping to 4.54%. And the VIX, Wall Street’s so called fear gauge, surged 40% to its highest level in two months.

One economist summed it up this way: “Markets have spent months searching for a reason for the Fed to cut rates. Today’s jobs report gave policymakers a reason not to.”

So for now, the party looks like it’s on pause. And everyone’s watching to see if the Fed really does raise rates again later this year something most people thought was off the table just weeks ago.