Dow falls 200 points, Nasdaq loses 2% as investors weigh rising rates and strong jobs report

U.S. stocks slid Friday as investors digested a stronger-than-expected jobs report and rising rates.

The Dow Jones Industrial Average fell 130 points, or 0.4%. The S&P 500 slipped 0.9%. The technology-heavy Nasdaq Composite fell 1.5%.

Hiring in the U.S. remained elevated in May. Nonfarm payrolls added 390,000 jobs last month, the Bureau of Labor Statistics reported Friday. Economists expected 328,000 jobs added, according to Dow Jones.

Average hourly earnings rose 0.3% in May, according to the BLS, slightly less than the consensus estimate of 0.4% and in line with April’s pace.

“Numbers this strong would likely reverse any hopes the Fed would consider a pause in rate hikes after the June/July increases, because it would signal the labor market remains very tight,” Tom Essaye of the Sevens Report said.

Traders selling stocks likely reacted to the move higher in rates with fears of the Federal Reserve tightening monetary policy at the forefront. The benchmark 10-year Treasury yield climbed after the report, above the 2.96% level. Yields rose across the board as the jobs report is unlikely to give the Fed reason to pause its aggressive tightening campaign.

Investors fear higher yields could slow the economy too much and tip it into a recession. Higher rates also discount the value of future earnings, which can make stocks look less attractive, especially growth and tech names.

Technology shares retreated amid the rising rates. Micron Technology fell about 6% and Nvidia fell nearly 3%. Mega-cap tech names Google parent Alphabet and Facebook parent Meta Platforms each lost more than 2%.

Apple eased more than 2% after a negative research note from Morgan Stanley. The firm said slowing App Store growth could hurt the company in the near-term.

Tesla shares fell more than 6% after Reuters reported, citing an internal email, that CEO Elon Musk wants to cut 10% of jobs at the car maker. According to Reuters’ report, Musk also said in the email that he has a “super bad” feeling about the economy.

With Friday’s decline, the three major averages are now marginally lower on the holiday-shortened week.

Stocks are coming off a strong session Thursday in which the major averages rose for the first time in three sessions.

Investors have been divided on recession calls and if the Fed may be positioned to take a break from its interest rate hikes.

Fed Vice Chair Lael Brainard on Thursday told CNBC it’s unlikely to do so anytime soon and that it’s “got a lot of work to do to get inflation down to our 2% target.”