Nasdaq extends losses to 1.6% at U.S. market open, Philadelphia Semiconductor Index drops nearly 6%
Miles Bennett
A blowout May payrolls report has traders fully pricing a Fed rate hike by December, triggering the first serious sell-off of this year's AI-driven tech rally — the Nasdaq fell 1.6% and chip stocks led the rout.
How far did the three major indexes fall at the open?
The S&P 500 extended its decline to 1%, the Nasdaq fell 1.6%, the Nasdaq 100 dropped as much as 2%, and the Dow slid 0.3%.
This means → losses widened from blue chips to growth names — capital is dumping high-valuation tech positions first.
The trigger: May non-farm payrolls came in far above expectations — a job market that strong makes rate hikes more likely.
Which chip and software names were hit hardest?
Chip stocks led the sell-off: ARM fell ~10%, Super Micro ~8%, Micron and Intel each ~7%, Nvidia over 2.9%.
Software stocks fell in sympathy: CrowdStrike briefly dropped ~5%, Cloudflare over 3.7%, ServiceNow 3.1%, Palantir 2.2%.
In plain terms = the AI names that rallied hardest this year fell hardest today — the valuation spring snapped back on one payrolls print.
Why is the S&P index-inclusion decision also dampening AI sentiment?
S&P Dow Jones Indices announced it will keep existing benchmark-index inclusion rules, rejecting a proposal to fast-track large-cap IPOs.
This means → SpaceX, Anthropic, and OpenAI will still need to wait at least one year after listing before entering the S&P 500.
In plain terms = these AI headline companies cannot tap the steady bid from passive index funds — tracker funds that automatically buy every stock in the index — any time soon. One "instant buyer on listing" channel just stayed shut.
Where do rate-hike expectations stand now?
Traders have fully priced in a 25-basis-point Fed hike by December and assign roughly 60% odds to an October move.
Nick Timiraos noted that the spring re-acceleration in hiring gives more ammunition to Fed officials who worry inflation is not contained and rates are too low.
This reflects a complete narrative flip — from "when will they cut?" to "when will they hike?" — the direction changed, not just the timing.
Why are gold and silver falling too?
Spot gold fell 2.0% to $3,414.4/oz; spot silver dropped 4.5% to $30.58/oz.
This means → strong payrolls → higher rate-hike expectations → stronger dollar and rising real yields → holding gold gets more expensive, so money exits.
Precious metals and tech stocks falling together signals this is not sector rotation — overall risk appetite is contracting.
Was anything bucking the sell-off?
Fannie Mae jumped 10% and Freddie Mac rose 9.7%.
The catalyst: President Trump said the two GSEs could be worth $1 trillion.
In plain terms = the only bright spot in a broad rout came from one presidential remark — policy expectations are holding an umbrella over these two names alone.
Content is for reference only, not financial advice.