austin
2026-06-08
Why Markets Sold Off on Friday
Friday's selloff was a straightforward reaction to the May jobs report. The US economy added 172,000 jobs last month. Unemployment held steady at 4.3%. Both numbers came in stronger than markets had hoped for.
That sounds like it should be good news. In the current environment it is not, at least not for stocks. A resilient labour market gives the Fed less reason to cut interest rates. Investors who had been pricing in rate cuts repriced that expectation out of the market almost immediately.
Treasury yields responded directly. The 20 and 30 year yields climbed back above 5%. When long duration yields move that quickly, the assets most sensitive to discount rate assumptions get hit hardest. That means technology and semiconductors, where valuations are built on earnings projections that stretch years into the future. The Nasdaq fell 4.2% on Friday, its worst single day since April 2025. The S&P 500 snapped a nine week winning streak.
What This Is and What It Is Not
The selloff was a mechanical response to interest rate expectations shifting. It was not a signal that anything has changed in the underlying business performance of the companies that sold off. The jobs data did not reveal a problem with AI infrastructure spending, or with earnings at the large technology companies that have been reporting strong results this cycle.
That distinction matters for how you read the move. A rate expectation repricing and a fundamental deterioration look identical on a one day chart. Over the following weeks they tend to resolve very differently.
What to Watch From Here
The pressure point is straightforward. If inflation data over the next two months stays sticky, the Fed holds rates where they are or raises them. Long duration yields stay elevated. Growth oriented stocks stay under pressure. If inflation softens, the rate cut narrative comes back and a portion of Friday's move reverses.
For investors holding technology positions with a multi year horizon, the relevant question is not what rates do in the next two months. It is whether the companies you own can sustain earnings growth and service debt comfortably at current borrowing costs. Companies with strong balance sheets and genuine earnings growth are in a materially different position from those carrying heavy debt into a sustained high rate environment. Friday treated them the same. The market usually corrects that distinction over time.
This post is for informational purposes only and does not constitute financial advice. Market data as at June 6, 2026.