Semiconductor sector suffers worst day in 6 years as rate-cut hopes fade

The Philadelphia Semiconductor Index posted its steepest single-day decline since March 2020 as a stronger-than-expected jobs report pushed rate-cut expectations further into 2026.

The S&P 500 fell 1.8% to 7,451, and the Nasdaq Composite tumbled 3% to 26,039 after May payrolls came in at 172,000 — more than double the 80,000 consensus.

"The hot jobs number takes a June rate cut off the table and puts a hike back in play," said Michael Wilson, chief equity strategist at Morgan Stanley. "For high-duration assets like semiconductors, that's a direct headwind."

The S&P 500 Information Technology sector dropped 4.6%, the worst among all 11 GICS groups, with only four of its 73 components trading in positive territory. Marvell Technology plunged 11.3%, Micron Technology fell more than 7%, and Broadcom lost 5.5% after a 13% rout Thursday. NVIDIA declined 5.2%, while Intel slid 8.7%.

The selloff erased roughly $400 billion in market value from the semiconductor sector, according to Bloomberg calculations, and marked the worst single-day loss for chip stocks since the Covid crash in March 2020. The CME FedWatch Tool now shows a 51% probability of a rate hike at the October meeting, up from 34% a day earlier.

The catalyst chain began at 8:30 a.m. Eastern when the Bureau of Labor Statistics reported May nonfarm payrolls of 172,000, nearly double the 80,000 economists had forecast. The unemployment rate held at 4.3% as expected, but the strength in hiring — combined with average hourly earnings that have declined in real terms for two consecutive months — signaled an economy that is running too hot for the Federal Reserve to ease.

The 10-year Treasury yield jumped 7 basis points to 4.54% within minutes of the release, repricing rate expectations across the curve. Higher discount rates compress the present value of future earnings, and no sector is more exposed than semiconductors, where valuations have been built on multiyear AI-driven growth assumptions. The Philadelphia Semiconductor Index fell more than 6%, its deepest one-day drop since March 2020.

Broadcom's shadow looms over the selloff

The chip rout accelerated a decline that began Thursday after Broadcom delivered strong quarterly results but failed to raise its long-term AI revenue forecast above the $100 billion target for fiscal 2027 it had previously set. Investors who had piled into semiconductor names on expectations of ever-higher guidance took the absence of an upgrade as a cue to exit. Broadcom's two-day loss of roughly 18% wiped out more than $150 billion in market capitalization.

Marvell Technology, which had surged more than 50% in the six sessions before Friday, gave back 11.3% in a single day — the largest decliner among major chip stocks. Micron Technology, scheduled to report earnings June 24, fell more than 7%. Analysts expect the memory-chip maker to post earnings of $19.29 per share, up from $1.91 a year earlier, on revenue of $33.88 billion.

Cross-asset contagion spreads

The selloff extended beyond equities. The U.S. dollar index rose 0.6% to 100.02 as rate expectations repriced higher. West Texas Intermediate crude fell 3.2% to $90 a barrel on demand concerns, while gold dropped 3.1% to $4,365 an ounce. Bitcoin briefly slipped below $60,000 before recovering to around $61,300, and crypto-exposed stocks such as Coinbase Global and MARA Holdings fell between 7% and 12%.

The Dow Jones Industrial Average, which had set a new intraday record earlier in the session, reversed to close down 0.8% at 51,155. The blue-chip index's relative outperformance reflected its lower exposure to high-duration technology names.

The next major test for markets comes June 24, when Micron reports earnings, followed by the Federal Reserve's June 17-18 meeting, where the Summary of Economic Projections will reveal whether policymakers share the market's newly hawkish view.

This article is for informational purposes only and does not constitute investment advice.