The stock market faced a considerable retreat today, with losses across the S&P 500 (-2.6%), Nasdaq Composite (-4.2%), and DJIA (-1.4%), resulting in lower weekly finishes for each index. For the S&P 500, this week's lower finish ends an impressive win streak at nine weeks.

The major averages faced a combination of pressures today as tech stocks extended yesterday's slide, while the Employment Situation report for May (172,000; Briefing.com consensus 96,000) beat headline expectations by a wide margin, placing upward pressure on Treasury yields amid rising expectations for a rate hike. The CME FedWatch Tool now assigns roughly a 71% probability to a rate hike at the December FOMC meeting, up from around 50% yesterday.

Growth-oriented pockets of the market generally lagged as a result, which compounded with yesterday's selloff across semiconductor stocks. The PHLX Semiconductor Index finished 10.3% lower, weighing heavily on the information technology sector (-5.3%).

Weakness was broad across the semiconductor group, with Broadcom (AVGO 385.74, -33.17, -7.92%) extending its post-earnings skid, memory names such as Micron (MU 864.01, -131.99, -13.25%) facing double-digit retreats, and other large chipmakers, including Intel (INTC 99.17, -12.61, -11.28%) and NVIDIA (NVDA 205.11, -13.55, -6.20%), moving sharply lower.

Software stocks also lagged, with Oracle (ORCL 213.41, -22.93, -9.70%) a notable decliner ahead of its earnings report next week. The iShares GS Software ETF finished 4.2% lower.

The consumer discretionary (-2.4%) and communication services (-1.7%) sectors also lagged as their mega-cap components, including Tesla (TSLA 391.00, -27.45, -6.56%) and Meta Platforms (META 593.00, -34.57, -5.51%) faced sharp retreats of their own.

The Vanguard Mega Cap Growth ETF finished 3.7% lower, contributing to the underperformance of the market-weighted S&P 500 (-2.6%) compared to the S&P 500 Equal Weighted Index (-1.5%).

On the earnings front, lululemon athletica (LULU 114.23, -10.69, -8.56%) was a notable laggard in the consumer discretionary sector after cutting its full-year outlook.

More defensive-oriented pockets of the market did garner some rotational interest today, but it was nowhere near enough support to keep the major averages from a lower finish. The consumer staples sector (+1.6%) led the way, while the utilities (+0.8%) and health care (+0.7%) sectors also posted gains.

Elsewhere, the real estate sector (+0.7%) notched a similar gain, while the financials sector (+0.1%) finished slightly higher.

Outside of the S&P 500, the Russell 2000 (-3.5%) underperformed amid the spike in Treasury yields.

Overall, today's selloff reflected the combination of an ongoing unwind across semiconductor stocks and a sharp repricing of Fed expectations following the stronger-than-expected employment report. Rising Treasury yields amplified pressure on growth-oriented areas of the market, while the limited rotation into defensive sectors was not nearly enough to offset the broad weakness across technology and mega-cap stocks.

U.S. Treasuries finished the week with sharp losses in most tenors, sending the 2-yr yield to a fresh closing high for the year while yields in the belly finished at two-week highs. The 2-year note yield settled up 11 basis points to 4.16% (+4 basis points this week) and the 10-year note yield settled up six basis points to 4.54% (-2 basis points this week). 

• Russell 2000: +14.2% YTD
• S&P Mid Cap 400: +11.8% YTD
• Nasdaq Composite: +10.6% YTD
• S&P 500: +7.8% YTD
• DJIA: +5.8% YTD

Reviewing today's data:

• May Nonfarm Payrolls 172K (Briefing.com consensus 96K); Prior was revised to 179K from 115KMay Nonfarm Private Payrolls 120K , (Briefing.com consensus 89K); Prior was revised to 177K from 123K, May Unemployment Rate 4.3% (Briefing.com consensus 4.3%); Prior 4.3%, May Average Hourly Earnings 0.3% (Briefing.com consensus 0.3%); Prior 0.2%, May Average Workweek 34.3 (Briefing.com consensus 34.3); Prior 34.3
  • The key takeaway from the report is that it is manna for headline writers but still lacks some important sustenance to suggest it is a marker of an economy running on a full stomach. To wit: real average hourly earnings on a year-over-year basis are down 0.4%; there were job losses in the retail trade (-1,100), information (-2,000), and financial (-22,000) industries; and the percentage of unemployed workers for 27 weeks or more increased to 27.5% from 25.3%, which we will assume speaks to the difficulty of finding a new job with comparable compensation to the prior one.
• Consumer credit increased by $20.7 billion in April (Briefing.com consensus: $17.5 billion) following a downwardly revised $22.3 billion increase (from $24.9 billion) in March.
  
  • The key takeaway from the report is that revolving credit growth outpaced nonrevolving credit growth in April, suggesting households may be using short-term borrowing to offset pressure from slowing real income growth and depleted savings. If this trend persists, it could support spending in the near term but raise concerns about household balance-sheet stress later.