Weekend Update #280
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Wall Street's longest winning streak of the year ended abruptly, as a vicious semiconductor selloff and a blockbuster jobs report combined to snap nine consecutive weeks of S&P 500 gains. The index fell 2.64% Friday to close at 7,383, its worst single session in more than a year, while the Nasdaq Composite plunged 4% to 25,709 for its steepest drop since April 2025. The Dow Jones Industrial Average, which had set a record above 51,000 only a day earlier on a broad rotation into healthcare, financials and value names, slipped 1.35% Friday to 50,866. The rout was concentrated in chips: the Philadelphia Semiconductor Index logged its largest one-day plunge since March 2020, erasing more than $1 trillion in market value, with Micron, Marvell, Intel and AMD all falling double digits. The trigger traced back to Broadcom's Wednesday results, where a narrow revenue miss and an unchanged full-year AI chip outlook proved devastating for one of the market's most crowded trades. A separate dynamic supported sentiment earlier in the week, as optimism over a potential Middle East ceasefire pushed oil lower and lifted shares outside of technology.
The week's defining macro release was Friday's May employment report, which blew past expectations and reframed the rate outlook. Nonfarm payrolls rose 172,000, roughly double the consensus near 80,000, while the unemployment rate held steady at 4.3% and prior months were revised higher, marking the strongest three-month hiring advance in more than two years. Leisure and hospitality led with 70,000 added jobs, its best showing in over three years. The strong print sparked a classic “good news is bad news” reaction, lifting Treasury yields and the dollar as traders abandoned hopes for near-term Fed rate cuts and began pricing the risk of further tightening. The data followed a run of firm reports earlier in the week: JOLTS job openings jumped to 7.62 million in April, ADP showed private payrolls up 122,000, and ISM manufacturing rose to 54, its fastest expansion in four years. Persistent price pressures remain a concern, with the Fed's preferred inflation gauge up 3.8% year over year in April.
Beyond Broadcom's earnings shockwave, corporate and sector headlines centered on AI infrastructure and a deepening crypto downturn. Nvidia certified all three major memory makers (Samsung, SK Hynix and Micron) to supply HBM4 for its next-generation Vera Rubin platform, which has entered full production ahead of third-quarter deliveries. In digital assets, Bitcoin treasury companies bore the brunt of a worsening rout, with the combined fully diluted value of those stocks falling to roughly $72 billion from a recent peak near $134 billion as firms turned to reverse splits and asset sales to survive. Strategy Inc. sold about $2.5 million of Bitcoin, its first disposal since 2022 and a symbolic break from its accumulation playbook. To add further pressure to crypto markets, Zcash plunged after a researcher found a critical vulnerability that could have allowed undetected counterfeit ZEC minting, though the exploit has reportedly been fixed and developers are working on transparency updates to reassure holders. On the policy front, the Senate passed President Trump's immigration enforcement funding bill after a dispute over a controversial $1.8 billion fund, sending it to the House, while the administration proposed new tariffs of at least 10% on imports from roughly 60 trading partners tied to forced-labor concerns.
Attention now shifts to whether Friday's hawkish repricing has further to run and whether the chip selloff marks a durable rotation or a buying opportunity. Investors will watch upcoming inflation data closely for confirmation of the Fed's path, with the strong labor backdrop and elevated PCE keeping the case for cuts on hold and rate-hike chatter alive. Geopolitics remains a key swing factor: U.S.-Iran talks over an interim deal showed little tangible progress amid continued clashes in Lebanon, and Iran's insistence on a regional ceasefire before reopening the Strait of Hormuz could reignite oil volatility. Markets will also track the immigration bill's House vote next week and the public comment period on the proposed tariffs, with written comments due July 6.
Friday's Close
(Weekly Performance)
S&P 500 7,383.74. (-2.59%)
Nasdaq 25,709.43 (-4.68%)
Dow Jones 50,866.78 (-0.32%)
Thank you Blue Room Senior Analyst NICK PEART.
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