NEW YORK, June 5, 2026, 11:03 (EDT)
- U.S. stocks slipped Friday morning as chip stocks dropped the most.
- May payrolls climbed by 172,000, beating forecasts and leaving rate-hike risk on the table.
- Broadcom and Nvidia put more pressure on the AI trade after their recent surge.
Stocks in the U.S. dropped early Friday, led down by chipmakers, as a strong May jobs number forced investors to reconsider the odds of Fed rate cuts this year or even think about possible tightening.
The SPDR S&P 500 ETF Trust was last quoted down 1.0% at $749.19. Invesco QQQ Trust, tied to the Nasdaq, dropped about 2.1%. DIA, which tracks the Dow, lost 0.3%. The VanEck Semiconductor ETF shed 4.7%. That was a larger drop than the market overall.
The drop came right after the S&P 500 touched a record 7,620.9 earlier this week. U.S. equity funds picked up a net $7.43 billion in the week to June 3, their largest intake in three weeks. Of that, technology funds pulled in $6.62 billion. That points to how much faith investors have put in AI-related stocks.
A crowded field meant there was no space for letdowns. The market didn’t dump stocks on worries about a soft economy; it sold off because a steady economy could mean higher rates stick around longer.
Nonfarm payrolls climbed by 172,000 in May, according to the Labor Department, with the unemployment rate holding at 4.3%. Gains showed up in leisure and hospitality, local government, and health care, but financial activities lost jobs. The department revised up March and April figures by 93,000 jobs combined.
Rates jumped. The two-year Treasury yield climbed 10 basis points to 4.15%. That yield tracks Fed policy bets. One basis point is one-hundredth of a point. Interest-rate futures priced in a 65% shot at Fed tightening in December, Reuters said, up from 48% before the jobs print. Jason Pride of Glenmede said inflation is still the “binding constraint on rate cuts.” Peter Cardillo at Spartan Capital Securities called the report “an upside surprise.” Reuters
Chip names lost ground. Broadcom dropped 4.5% to $400.01 late, while Nvidia slid 3.7% to $210.51. That kept pressure on the chips group, which has led most of Wall Street’s 2026 rally.
Broadcom reported fiscal Q2 revenue of $22.19 billion, a 48% increase year over year. AI chip revenue was up 143% to $10.8 billion. CEO Hock Tan called it “record revenue, operating profit and free cash flow.” PR Newswire
Broadcom’s revenue and its forecast for AI chip sales came up short of Wall Street’s hopes, according to Reuters. CEO Hock Tan also kept his earlier long-term AI sales outlook steady, without an increase. “The market demands perfection” for chip stocks to extend their run, Direxion’s Ryan Lee said after the drop. Reuters
Chip stocks like Nvidia, AMD and Micron slipped earlier, Reuters said, with investors selling semiconductors after their extended run. “It’s healthy for the market to pull back a little bit and slow down,” said Mark Malek, chief investment officer at Siebert Financial. Reuters
Charu Chanana, chief investment strategist at Saxo, summed it up in a global markets note: the issue isn’t AI demand drying up, but that “expectations had become extremely high.” That’s what played out Friday. Even good numbers fell short. Reuters
Selling was uneven. Some defensive sectors caught bids, and Reuters said six of the 11 main S&P 500 sectors traded higher. Consumer staples led as money moved out of tech.
Risk is still real. If yields stay up and oil sticks at these levels, equity values get squeezed by higher discount rates and less real spending. AP said the 10-year Treasury hit 4.54%, with oil holding firm as the Strait of Hormuz stayed mostly shut and a U.S.-Iran ceasefire extension was still in limbo.
Friday’s session is about whether the AI trade can hold after the rates move. A softer inflation reading might calm things. But if yields keep climbing or another chip name doesn’t top the higher bar, the week’s record starts to look more like a warning than a win.
