Last Week
After months of defying bad news, gravity finally caught up with Wall Street last week, as investors reacted to a stronger-than-expected jobs report, geopolitical uncertainty, tariff noise, and weakness in Technology shares. Most of the damage came on Friday, after May non-farm payrolls increased 172,000, more than double the forecast, fostering belief among traders that the next move in interest rates will be a hike rather than a cut. Despite President Trump’s occasional optimistic statements, the war reached its 100th day, fighting continued in the Middle East, and oil prices rose. The President also announced that U.S. said it would impose new tariffs on 60 countries.
The downdraft in the equity markets was broad-based, with declining issues outnumbering advancing issues by a factor of 1.7-1. Tech stocks took the hardest hit, as the Nasdaq Composite nosedived 4.7%, while the S&P 500 lost 2.6% and the Russell 2000 fell 2.9%. The recent complacency evaporated, and the “Fear Index” (CBOE Volatility) surged over 40%. The Dollar rallied, Gold sank 5%, and Bitcoin plunged 17.3%. The bond market held steady at recently elevated levels, and the defensive sectors of the stock market, led by Energy, Financial, Consumer Staples, and Healthcare, all finished in the green.
The sell-off in semiconductor stocks was particularly pronounced, with many companies’ shares diving over10%. One possible theory for the magnitude of the decline is that traders were freeing up capital to deploy in the upcoming SpaceX IPO. In other words, hot money is chasing the next shiny object, following an unprecedented rally in the chip stocks.
On the Chicago Sports Scene, the White Sox may become the next shiny object if fans were open to traveling south of McCormick Place, as the squad continues to show improvement. Not much positive to say about the Cubs and the Sky, while the Bears’ ownership is foolishly toying with the idea of moving to Hammond, Indiana, which is far south of 35th and Shields.
This Week
Will the bad moon from Friday keep rising? Or will the sun shine for investors? Developments in the Middle East, inflation data, and the tone of the IPO market will determine the tune.
The main economic event will be the May Consumer Price Index report on Wednesday. Economists expect core CPI to tick up to 2.9% Y/Y, while Thursday’s Producer Price Index report will offer another read on inflation pressures.
On Friday, SpaceX is expected to begin trading after pricing its largest IPO in history. The company is seeking to raise about $75B at a valuation approaching $1.8 trillion. That valuation seems out of this world.
The stocks mentioned above may be holdings in our mutual funds. For more information, please visit www.nsinvest.com.