S&P 500, Nasdaq Post Worst Day of Year Amid AI Stock Slump

AP Photo/Seth Wenig

The S&P 500 and Nasdaq posted their worst day of the year on Friday as a sharp pullback in AI stocks rattled Wall Street and a surprisingly strong jobs report fueled fresh concerns that the Federal Reserve could keep interest rates elevated for longer.

According to CNN, the S&P 500 fell 1.8%, while the Nasdaq Composite plunged 3%, putting it on track for its biggest one-day decline since October 2025. The losses ended a recent run of market optimism that had helped push major indexes to record highs earlier this week.

CNN reported that semiconductor and AI-related stocks led the decline, with a popular exchange-traded fund tracking memory-chip companies falling 12% after what the network described as an “enormous rally in recent weeks.”

Investors were also coming to terms with new economic data showing the U.S. labor market remains stronger than expected. The Labor Department reported Friday that the economy added 172,000 jobs in May, well above forecasts.

While strong hiring is generally viewed as a positive sign for the economy, CNN explains that traders worried the report could make it harder for the Federal Reserve to justify cutting interest rates this year — and could even increase the likelihood of future rate hikes if inflation remains elevated.

According to CNN, markets now assign a 43% chance to a Fed rate increase in December, up from 26% just one month ago.

“In the near term, the data confirms that Fed easing is off the table this year, and markets continue to worry that the next move could be a hike,” James McCann, senior economist for investment strategy at Edward Jones, said to the outlet.

The market turbulence prompted a response from President Donald Trump on Friday morning, who argued on Truth Social that strong economic data should have lifted stocks rather than sent them lower.

“With a great Jobs Report, like just announced, stocks should go up, not down. That’s the way it was for 200 years. Growth does not mean inflation! How else can a Country attain GREATNESS??? President DJT,” he wrote.

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