Wall Street declines as chip stocks fall, jobs data raises Fed rate hike expectations

The US economy added 172,000 jobs in May. Wall Street had expected somewhere around 80,000 to 85,000. That mismatch between forecast and reality triggered one of the sharpest single-day selloffs in over a year, dragging equities, semiconductors, and crypto down with it.

Money markets now price in a 98% probability of a 25-basis-point rate hike by year-end, up from 60% before the report dropped on June 5. The unemployment rate held steady at 4.3%. But paired with job creation that doubled expectations, it painted a picture of an economy running hotter than the Fed wants, and investors reacted accordingly.

The damage across major indexes

The Nasdaq bore the brunt, falling 4.18% for its largest one-day percentage loss since April 2025. The S&P 500 shed 2.64%, while the Dow Jones dropped roughly 1.35%, ending what had been a nine-week winning streak.

Semiconductor stocks led the carnage. The Philadelphia Semiconductor Index posted its worst single-day percentage decline since March 2020. Chip stocks collectively erased an estimated $1 trillion to $1.3 trillion in market value in a single session.

Crypto caught in the crossfire

Bitcoin dropped more than 4%, approaching or dipping below the $60,000 level. Crypto-adjacent equities fared even worse. Coinbase, MicroStrategy, and Robinhood all declined between 6% and 12%.

The logic connecting jobs data to crypto prices runs through the Federal Reserve. Stronger-than-expected employment data reduces the likelihood of near-term rate cuts. Lower rates generally mean more liquidity in financial markets, and that liquidity tends to find its way into riskier assets like Bitcoin. When the rate-cut narrative evaporates, so does one of crypto’s key bullish catalysts.

What this means for investors

With a 98% implied probability of a rate hike, the calculus for portfolio allocation shifts meaningfully. Growth stocks, which derive a larger share of their valuation from future earnings, become less attractive when discount rates rise. The semiconductor space, despite its strong fundamental tailwinds from AI demand, now faces the headwind of higher borrowing costs and compressed multiples.

Bitcoin’s correlation with risk assets has been climbing, meaning it offers less diversification benefit precisely when investors need it most. The 4%-plus decline on a single macro data point underscores how sensitive digital assets remain to traditional financial conditions.

The Philadelphia Semiconductor Index’s worst day since March 2020 is a useful historical anchor. After that March 2020 crash, chip stocks went on an extraordinary multi-year run. But the context was entirely different: the Fed was cutting rates to zero and flooding markets with liquidity. Today’s backdrop is the mirror image, with the central bank leaning toward tightening, not easing.

Disclosure: This article was edited by Editorial Team. For more information on how we create and review content, see our Editorial Policy.