The three major U.S. stock indexes all fell sharply on Friday. The main trigger for this market move was that robust employment data reinforced expectations that the Federal Reserve will maintain tight monetary policy or even raise interest rates. The high-interest-rate environment placed significant pressure on growth stocks and technology stocks. The Dow Jones Industrial Average fell 1.35%, the S&P 500 dropped 2.64%—marking its largest single-day decline since October 2025—and the Nasdaq Composite plunged 4.18%, shedding more than 1,100 points, its biggest one-day loss since April 2025.
Data released by the U.S. Bureau of Labor Statistics showed that nonfarm payrolls increased by 172,000 in May, exceeding all economists’ expectations. The April gain was also revised upward from 115,000 to 179,000, bringing the three-month average increase in U.S. employment to its strongest level in more than two years. The unemployment rate remained at 4.3% for the third consecutive month. Strong employment, coupled with high energy prices, may further increase pressure on the Federal Reserve to consider raising interest rates to curb inflation. Several Fed officials have already stated that, with inflation metrics persistently exceeding the 2% target and the deviation widening, they cannot support rate cuts, and they are more open to further rate hikes. The interest rate swap market shows that traders expect the Fed to raise rates by 25 basis points by December, with the probability of an October rate hike at approximately 60%.
John Flood, head of Americas equity execution services at Goldman Sachs, believes that Friday’s stock market pullback offers investors an opportunity to increase positions, not a reason to retreat. He stated that there is a clear upward path for the S&P 500 to reach 8,000 points this year. Flood pointed out that Friday’s decline was likely driven by investors taking profits ahead of the weekend and by market expectations of increased stock supply from initial public offerings (IPOs). Historical experience suggests that such sell-offs tend to reward buyers.
Flood said that the most frequently cited concerns among investors currently include inflation, geopolitical tensions involving Iran, and risks in the private credit market. However, he sees these worries as a healthy “wall of worry” rather than evidence of deteriorating market sentiment. Even though the S&P 500 has hit 24 record highs this year, Goldman Sachs’ proprietary market sentiment indicator—which synthesizes positioning data from hedge funds, mutual funds, retail investors, and overseas investors—remains near neutral levels.
Flood believes that the factor most likely to challenge his optimistic outlook would be widespread disappointment in the overall earnings performance of U.S. corporations, but he sees no signs of that yet. He also expects that corporate stock buybacks will offset the new supply from IPOs. As of now, Flood remains firmly bullish: “We view these pullbacks as buying opportunities. There is a clear path for the S&P 500 to reach 8,000 or even higher this year.”
