Stock markets suffered a sharp drop on Friday, with the tech-heavy Nasdaq index undergoing its biggest one-day drop since April 2025.

With fears mounting that gains so far this year may be unsustainable, a surprisingly strong US jobs report for April sparked a sell-off, with the major US markets ending the week in the red.

The data stoked fresh fears among investors that the Federal Reserve will keep interest rates higher for longer, especially as inflation remains stubborn.

The Nasdaq index fell by more than 4%, the S&P 500 closed 2.6% lower and the Dow Jones Industrial Average dropped 1.35%.

Digital assets also suffered a sharp sell-off on Friday. Bitcoin, the biggest cryptocurrency, dropped sharply as investors rushed to offload riskier assets across the board.

The sudden drop showed how much investors fear high interest rates.

While a strong jobs market is usually good news for the economy, it means the Federal Reserve is less likely to cut borrowing costs anytime soon.

David Doyle, head of economics at Macquarie Group, said Friday's jobs report was potentially "too good", especially against a backdrop of high inflation.

He said the figures raised the likelihood the Federal Reserve will raise interest rates this year, contributing to the stock market sell-off.

It meant investors who had been holding out for rate cuts were forced to quickly change their plans.

However, Friday's sell-off did not mark a global market panic. Instead, it saw investors shifting away from tech stocks, which critics have warned are overvalued and could crash in the same way the dotcom bubble did in the early 2000s.

Major investment funds pulled money out of AI and microchip companies, share prices of which have soared in recent years.

Instead of leaving the market entirely, investors piled into traditionally safer investments. Sectors such as healthcare, utilities and consumer staples, including Kraft Heinz and Keurig Dr Pepper, saw a boost as traders looked for stability.

The sharp drop highlights how vulnerable big tech stocks have become.

With a handful of tech companies accounting for such a large chunk of the stock market, any shift in investor sentiment can easily drag the entire market down.

Reacting to the market's drop, US President Donald Trump criticised the negative reaction to Friday's jobs report. He said "too much emphasis is placed on inflation".

"I hope the market starts to learn that when you have good numbers the market should go up not down," Trump added.

Meanwhile, tech and politics will be the major focus next week. Trump has invited some of the top AI executives to the White House to discuss a new proposal: the US government acquiring public stakes in their firms.

Trump claimed the move would aim to shift how the public views the new technology, allowing everyday Americans to "benefit from the success of AI".