Chips Crack, Jobs Sizzle, and the Nine-Week Streak Snaps

After nine straight weekly gains - the longest stretch since 2023 - U.S. equities finally hit the wall. The S&P 500 fell -2.59% to 7,383.74 after Friday's brutal -2.64% session erased a week that, just five trading days earlier, looked destined for a tenth weekly win not seen since late 1985. The Nasdaq Composite plunged -4.68% to 25,709.43, with Friday's -4.18% drop marking its worst single session since April 2025. The Russell 2000 lost -2.93% to 2,833.50, and the Dow Jones managed a relatively modest -0.32% retreat to 50,866.78 - cushioned by industrial and energy names. Even the broader NYSE Composite slipped -1.40% to 23,256.50. The VIX exploded +39.7% to 21.51, finally waking up after a complacent spring.

Two distinct shocks blew the rally apart. The first arrived Wednesday after-hours: Broadcom (AVGO) beat on revenue ($22.19B vs. $22.13B) and EPS ($2.44 vs. $2.39) and posted record Q2 AI chip revenue of $10.8B (+48% YoY), but failed to RAISE its full-year AI semiconductor forecast - guiding Q3 AI revenue to just $16.0B versus the Street's $17.2B. The stock sank -14% Thursday, taking the entire AI-chip complex with it. By Friday, Marvell was -16%, Micron -13%, Intel -11%, and AMD -11%; the SOX semiconductor index posted its worst session since the tariff panic of April 2025, erasing over $1 trillion in market cap. The contagion spread overnight to Asia, where Korea's Kospi closed -5.54% with Samsung -6.4% and SK Hynix -9.9%.

Jobs Sizzle, Rate-Cut Bets Die

The second shock landed Friday at 8:30 AM ET. The May Employment Situation report stunned: nonfarm payrolls rose +172,000, more than double the +85,000 consensus. The unemployment rate held at 4.3%, average hourly earnings cooled to +3.4% YoY, and the kicker - March and April were revised UP by a combined +93,000. Job gains were broad: leisure and hospitality +70K, local government +55K, health care +35K, and even manufacturing eked out +7K. The bond market reacted instantly: the 10-year Treasury yield surged +6 bps to 4.55%, and CME FedWatch odds of a Fed rate HIKE by year-end jumped to 70%. Gold lost -3.27% on the day alone (-4.07% on the week) to $4,340, while the dollar regained its bid.

April PCE: Sticky 3.3% Core

On Thursday May 28, the April Personal Income and Outlays report confirmed inflation has dug in. Headline PCE rose 3.8% YoY (vs. 3.5% prior), and crucially core PCE accelerated to 3.3% YoY (vs. 3.2% prior) - the highest core reading in over a year and well above the Fed's 2% target. The three-month annualized headline pace hit a stunning 6.02%. Combined with the May ISM Manufacturing PMI of 54.0% (highest since May 2022) and ISM Services PMI of 54.5% (23rd straight month in expansion), the data tell a clear story: the U.S. economy is reaccelerating with inflation that simply will not quit. Chair Warsh's first FOMC meeting (June 16-17) is shaping up as the most consequential in years.

Bitcoin Cracks, Oil Pops on Iran

Risk-off swept crypto. Bitcoin fell to $62,875 intraday Friday and a session low of $59,765 - its lowest level since October 2024 - finishing the week down -14.3%. U.S. spot Bitcoin ETFs notched a record $4.4 billion in net outflows over 13 days. Meanwhile WTI crude flipped the other way, rising +6.5% to $93/bbl (from $87.36 the prior week) as renewed U.S.-Iran clashes and Hezbollah's rejection of a U.S.-brokered ceasefire reignited Strait of Hormuz fears. The peace dividend that powered May's rally is, for now, on hold.

May CPI Tuesday, PPI Wednesday, and the Pre-FOMC Blackout

With the FOMC's pre-meeting blackout period now in effect, Fed officials go quiet just as the calendar delivers two inflation prints that could either calm or shatter what's left of the equity rally. May CPI on Wednesday June 10 is the marquee event: a hot print would seal the deal on a June hold (or worse) and crush any remaining 2026 rate-cut hopes; a cool surprise could restart the dip-buying machine. With core CPI sitting at 2.8% YoY (April) and core PCE at 3.3%, expectations are running hot. Add a holiday-thin volume backdrop and you have a recipe for volatility.

Mon Jun 8: Quiet Open, Auctions

No top-tier U.S. data. Treasury holds the first leg of its mid-month coupon auctions (3-year notes). Watch for any further chip-sector spillover from Asia overnight - Friday's selloff has not yet been fully digested.

Tue Jun 9: NFIB Small Business & 10Y Auction

NFIB Small Business Optimism for May releases at 6:00 AM ET - the cleanest read on Main Street sentiment. Treasury's 10-year note auction at 1:00 PM ET is the real event: bid-to-cover and indirect demand will reveal whether foreign buyers are stepping in at 4.55% or whether the yield needs to push higher to clear.

Wed Jun 10: May CPI - The Big One

May CPI releases at 8:30 AM ET. Consensus is hovering around +0.3% MoM headline and +0.3% MoM core, which would push YoY headline near 3.9-4.0% and core near 2.9-3.0%. A print above consensus and the 10-year likely tests 4.70-4.80%; a soft surprise and the chip selloff likely reverses hard. 30-year Treasury auction at 1:00 PM ET will absorb any post-CPI yield move.

Thu Jun 11: May PPI & Jobless Claims

Producer Price Index for May at 8:30 AM ET - especially core PPI services, which feeds directly into the Fed's preferred core PCE. April PPI was hot (+1.4% MoM); another upside surprise would compound CPI-day damage. Initial jobless claims also release.

Fri Jun 12: Michigan Sentiment & Inflation Expectations

University of Michigan preliminary Consumer Sentiment for June at 10:00 AM ET. The 5-10 year inflation expectations sub-component is the data point traders care about most - if it ticks above 3.5%, the bond market will assume the Fed has lost the long-run inflation narrative.

With the 10-year at 4.55%, the VIX at 21.51, WTI back near $93, and Bitcoin at $62,875 (down from $80K just three weeks ago), the comfortable spring rally has given way to a far more contested tape heading into the June FOMC. The S&P 500 still sits +7.85% YTD and remains above its 50-day moving average, but Friday's chip selloff and the resurrection of rate-hike chatter have meaningfully changed the calculus. A cool May CPI on Wednesday would reignite the bulls; a hot print likely sends the 10-year above 4.70% and tests the rally's structural foundation.