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Markets Retreat on Fed Rate Fears: Tech Stocks Slide While S&P 500 Faces Critical Test

U.S. stocks closed sharply lower on Friday, snapping a nine-week winning streak as investors reacted to stronger-than-expected labor market data and renewed concerns that interest rates could remain elevated for longer.

The selloff was led by technology and semiconductor stocks, which have been among the strongest performers throughout the recent market rally. The Nasdaq Composite tumbled 4.18%, marking its steepest daily decline in more than a year. The S&P 500 fell 2.64%, while the Dow Jones Industrial Average dropped nearly 700 points.

Chipmakers experienced particularly heavy losses, with the Philadelphia Semiconductor Index recording its largest one-day decline since the pandemic-driven market turmoil of 2020. More than $1 trillion in semiconductor market value was erased as traders rushed to reduce exposure following months of AI-fueled gains.

Investor sentiment weakened after the latest U.S. employment report showed the economy added 172,000 jobs in May, comfortably beating expectations. The stronger labor market reinforced the view that the Federal Reserve may have little urgency to begin cutting interest rates, prompting a sharp repricing of rate-cut expectations.

Higher bond yields and the prospect of restrictive monetary policy weighed heavily on growth stocks, whose valuations are particularly sensitive to interest rate movements. As a result, many of the market's largest technology names came under significant pressure.

Meanwhile, geopolitical tensions in the Middle East continued to add uncertainty to the outlook. Rising energy prices have revived concerns that inflation could remain stubbornly high, potentially complicating the Federal Reserve's path toward future policy easing.

Crypto-linked stocks also joined the decline as risk assets broadly moved lower. Despite the sharp pullback, many analysts continue to view the move as a healthy correction after an extended rally rather than the beginning of a sustained bear market.

Looking ahead, traders will focus on upcoming inflation data, economic releases, and Federal Reserve commentary for further clues regarding the direction of monetary policy during the second half of the year.

S&P 500 Technical Analysis (2H)

The S&P 500 remains under pressure after rejecting the 7,600 area and breaking below several key short-term support levels. The recent decline reflects growing bearish momentum as sellers regain control following weeks of sustained upside.

Price is now testing the important 7,333 support zone. Holding above this level could encourage dip buyers to re-enter the market and potentially trigger a rebound toward the 7,500–7,520 resistance region.

However, a decisive breakdown below 7,333 would likely confirm additional downside risk, exposing the index to a deeper correction toward the 7,150–7,050 area.

From a broader perspective, the market remains vulnerable while trading beneath the key resistance zone between 7,517 and 7,620. Until buyers reclaim this area, short-term momentum favors the bears, with traders watching closely for either a stabilization near support or a continuation of the recent selloff.

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