Wall Street's major indexes fell on Friday, as chipmakers lost steam following a sharp rally, while a stronger-than-expected monthly jobs report raised expectations of a hawkish monetary policy.
Nonfarm payrolls rose by 172,000 jobs in May after increasing 115,000 in April. The numbers were also much higher than the 85,000 forecast by a Reuters survey of economists.
Money markets now see a 98% chance that the U.S. Federal Reserve will hike interest rates by 25 basis points before the end of the year, up from a nearly 60% expectation before the data.
The data comes ahead of new Fed Chair Kevin Warsh's first policy meeting later this month, as he takes charge of an economy grappling with elevated inflation, partly exacerbated by the Middle East conflict.
"You're not talking about a labor market that's doing fabulous, but you're also not looking at a labor market that's completely crumbling," said Mark Malek, chief investment officer at Siebert Financial.
"It's healthy for the market to pull back a little bit and slow down."
Nvidia, the largest company by market value, lost 2.5%, while Intel, Micron, AMD and Broadcom dropped between 4.2% and 6.2%.
Tech shares declined for a third straight session, falling 2.5%. The Philadelphia SE Semiconductor index tumbled over 5%.
Gains in semiconductor stocks were instrumental in Wall Street's recovery from March lows to record highs. A temporary ceasefire in the Middle East and strong earnings growth also supported the advances.
Six of 11 major S&P 500 indexes moved higher, with consumer staples leading the gains, as investors rotated money into other sectors.
At 09:43 a.m. ET, the Dow Jones Industrial Average fell 128.36 points, or 0.25%, to 51,433.57, the S&P 500 lost 64.63 points, or 0.85%, to 7,519.68 and the Nasdaq Composite lost 374.02 points, or 1.39%, to 26,456.94.
If current losses hold, the S&P 500 would register its first weekly decline since April. The tech-heavy Nasdaq was also set to end the week slightly lower, while the price-weighted Dow was on track to rise for a third straight week.
Talks between the U.S. and Iran remained stalled heading into the weekend, underscoring complications facing a peace deal to end the conflict.
Citi said it was trimming equity exposure after a strong run, flagging rising inflation and positioning risks. It kept a constructive longer-term view on U.S. equities supported by AI-driven earnings.
Among market movers, Lululemon Athletica slumped 8% after the athletic apparel maker cut its annual profit forecast and projected second-quarter earnings well below Wall Street estimates.
Cooper Companies rose 6.4% after the maker of contact lenses beat estimates for second-quarter results.
S&P Global said it would not change the eligibility requirements for its major indices, which effectively rules out a swift entry for Elon Musk's SpaceX to the benchmark S&P 500 after it goes public in what would be the world's biggest IPO.
Meanwhile, S&P Dow Jones Indices will announce the results following its rebalancing after markets close. Chipmaker Marvell Technology, which now boasts over $270 billion in valuation, is among the contenders to be added to the benchmark index.
Declining issues outnumbered advancers by a 2.04-to-1 ratio on the NYSE, and by a 2.11-to-1 ratio on the Nasdaq.
The S&P 500 posted 7 new 52-week highs and 2 new lows, while the Nasdaq Composite recorded 27 new highs and 38 new lows.
