An impressive US jobs gain of 172k in May together with unemployment holding steady at 4.3% pushed Treasury yields higher and slammed stock indices The Nasdaq Composite posted its worst daily and weekly performance in more than a year The S&P 500 failed to replicate its record length streak in 1985 and the Philadelphia Semiconductor Index lost about $1 trillion in market capitalization
The main driver was the rise in the probability of Fed tightening in 2026 to 76% The futures market now places the odds of two federal funds rate hikes at roughly one in three When the S&P 500 rally rests on strong corporate earnings capital outflows from the crypto market and low sensitivity to geopolitics and interest rates the removal of any one element can cause the entire structure to fall apart
The poor performance of US stocks drew the anger of Donald Trump In his view when the US economy is showing strength the stock market should be rising However investors are becoming increasingly concerned that stronger economic data could force the Federal Reserve to maintain a restrictive monetary policy for a longer period which continues to pressure risk assets and equity markets.
