This Week
Today saw the classic “good news is bad news” market reaction.
The good news: The economy added 172,000 jobs in May – double consensus estimates (88,000) – and the last two months were revised up by 93,000 jobs. So, in the last three months, the economy added 188,000 jobs per month on average (up from negative 4,000 per month in February).
The bad news (for markets): With the labor market looking healthier, it makes it much easier for the Fed to just worry about inflation. As a result, markets are now pricing a full 25-basis point (bp) Fed rate hike this year – up from 15bp yesterday.
The jobs report was just the latest market-moving event this week. We also had another mega-cap earnings report, new tariffs and continued developments in the Iran conflict:
- While the mega cap AVGO beat first-quarter earnings estimates, its AI chip revenue forecast missed expectations, raising concerns about the durability of the rally in chips stocks.
- The U.S. Trade Representative proposed new tariffs that range from 10%-12.5% and impact 60 economies, though they’d largely replace the temporary 10% global tariff set to expire on July 24.
- Hopes for a near-term peace deal with Iran faded this week. Last Friday, President Trump was reviewing a peace deal. By last weekend, the U.S. and Iran were exchanging attacks, and on Monday, Iran was threatening to suspend negotiations if Israel continued attacking Lebanon. On Wednesday, the U.S. State Department announced a ceasefire between Israel and Lebanon – only for Hezbollah to refuse to abide by it.
With markets worried about rate hikes, the Nasdaq-100® fell 5% today (and for the week) – its biggest one-day drop since April 2025 – and 10-year Treasury yields rose 10bp this week to 4.55%.
Next Week
Here are the top events I’m watching next week:
- Tuesday: NFIB Small Business Optimism (May)
- Wednesday: CPI Inflation (May)
- Thursday: Producer Price Inflation (May), Jobless Claims
- Friday: University of Michigan Consumer Survey (Jun. Prelim.)
