A hotter-than-expected May jobs report triggered a wholesale repricing of Federal Reserve policy on Friday, sending the benchmark 10-year Treasury yield above 4.53% and pulling the major U.S. equity indexes sharply off their recent record highs. Risk-off sentiment rippled across global markets, hammering rate-sensitive technology and growth names while reigniting a selloff in digital assets that has now pushed Bitcoin toward the $63,000 threshold.
The Bureau of Labor Statistics reported nonfarm payrolls expanded by 172,000 in May, more than double the low end of economist forecasts clustered around 80,000 to 85,000. The unemployment rate held steady at 4.3%, where it has resided since July of last year, while average hourly earnings rose 0.3% on the month to $37.53, keeping annual wage growth pinned at 3.4%. Upward revisions added 93,000 jobs to the prior two months, painting a more resilient spring for the labor market than initial readings had suggested.
The composition was almost uniformly bullish for growth: leisure and hospitality led with 70,000 additions, local government added 55,000, and health care contributed another 35,000. Financial activities was the lone major drag, shedding 22,000 positions. For Fed officials, the data complicates an already contested path toward easing, since a labor market that refuses to crack removes the urgency to defend the labor side of the dual mandate.
Bonds Reprice Higher
The front end of the curve moved hardest. The 2-year Treasury yield, most sensitive to policy expectations, ripped roughly 18 basis points higher on the print, and the 10-year breached 4.53% before paring slightly. Rate-cut probabilities collapsed: futures now imply a single quarter-point reduction this year, with the September FOMC meeting no longer fully priced for a move.
“This is the kind of report that pushes the Fed off the stage. Until the data bends, the bar for easing is exceptionally high.” — senior rates strategist, global macro hedge fund
European duration followed the move, with Bund yields rising 12 basis points as a stronger U.S. labor backdrop reduced demand for safe-haven European paper. The dollar extended its June advance, with the DXY index climbing to a six-week peak as global capital rotated into U.S. yield.
Equities Off Records
After a powerful first-half run that had carried the Dow, S&P 500, and Nasdaq to successive all-time highs, Friday’s tape gave back a meaningful slice of the rally. The Dow finished down roughly 695 points, while the tech-heavy Nasdaq declined around 2.4% as long-duration cash flows reversed. Rate-sensitive sectors led the retreat: regional banks outperformed on a steeper curve, while software, semiconductors, and high-multiple consumer names bore the brunt of the discount-rate move.
Energy and utilities — the day’s only positive S&P sectors — reflected a rotation into value and dividend yield. Defensive positioning late in the session suggested investors are reluctant to chase the indexes back toward last week’s records without clearer guidance from Powell’s upcoming congressional testimony.
Crypto Rout Deepens
Digital assets continued the slide that has defined the second quarter. Bitcoin slipped toward $63,000, extending a decline that has now erased more than 50% from its previous cycle peak. Ethereum fared worse, falling roughly 10% to multi-year lows as leveraged long liquidations cascaded through major exchanges. More than $1.7 billion in long positions were forcibly closed over 24 hours, the largest single-day flush since the early-May deleveraging event.
Spot Bitcoin ETF outflows extended to a 13th consecutive session, a streak not seen since the products launched in early 2024. With the realized correlation between BTC and the Nasdaq briefly spiking to 0.78, traders increasingly treat the asset as a high-beta proxy for risk assets rather than a digital gold hedge.
Commodities And Currencies
Gold held firm near $4,413 an ounce, with the metal cushioned by a weaker yen and persistent central-bank demand even as real yields rose. Silver underperformed, sliding more than 1.5% on industrial-demand concerns tied to a softer global growth picture. WTI crude traded sideways around $67 a barrel as a firmer dollar offset supply-side risk from renewed Middle East tensions.
In FX, USD/JPY pushed to 156.0, a fresh multi-month high, as the Bank of Japan’s ultra-dovish stance continued to weigh on the yen. The euro slipped below 1.0850 against the dollar, while Cable drifted toward 1.2650 as UK services PMI disappointed. The Australian and New Zealand dollars led the commodity bloc lower, each down roughly 0.7% on the session.
With Fed officials now sidelined until Powell’s mid-June testimony and the next CPI print still ten days away, the market’s near-term trajectory rests on whether a resurgent labor backdrop bleeds into a hotter inflation reading — or whether the recent deceleration in consumer prices reasserts itself and forces policymakers back toward the easing path the curve had been pricing as recently as Wednesday.
Written by James Wright, Economy Correspondent
