June 5th Pre-Market

Good Morning

New payrolls came in at 172K, more than double what anyone expected. That pretty much immediately decided the Fed's done cutting, and the bond market went a step further, now pricing better-than-even odds of a hike by year-end.

The hiring was strong, but wages came in tame, and tame wages are the part the Fed actually watches. Real inflation worry this summer is sitting in an oil tanker near Hormuz, not in anyone's paycheck. Yes, strong jobs is another signal to hike but I think the Fed will hold off as long as possible.

Let's dig in...

Today's Big Picture

Jobs Beat, And Yields Are Pricing A Hike 

Payrolls hit 172K against an 80K forecast, unemployment steady at 4.3%. Most people read that as "no rate cut," but the bond market went further. Traders flipped from under 50% to nearly 60% odds of a hike by year-end. The 10-year tore through 4.5%, the 30-year cleared 5%.

The Selloff Is Dumping The Chips Nvidia Just Picked

Broadcom's soft guidance Wednesday kicked off a memory-led exit, and Korea dumped SK Hynix, Samsung and Micron overnight. Then Jensen Huang opened his mouth. Hours later he confirmed all three just qualified to supply HBM4 for Nvidia's next platform, and all three are racing to ship it. So the names getting sold are the ones Nvidia just locked into its biggest product cycle.

Citi's Risk Checklist Is At 10 Of 18 

Citi's bear-market checklist just lit up 10 of 18 warning flags, the most since 2008. Stretched valuations, bullish sentiment, heavy AI spending, a flood of IPOs, all flashing at once. Citi isn't calling a top, and neither am I. These signals can run hot for a long time. It's just worth knowing how stretched the setup is while everyone's still buying.

Market Overview

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Stock Spotlight (pre-market)

Nvidia $NVDA ( ▲ 1.94% )  

Down only a touch while the rest of the group bleeds. That's the tell, and it's also the trap. Every long in the chip space is now leaning on Nvidia to hold the line. If it cracks, that's the whole sector's last support gone, and the people hiding in it have nowhere left to go.

Micron $MU ( ▼ 7.74% )  

Taking the worst of it as the selling hits memory, the same names Korea dumped overnight. Anyone who owns it for the memory cycle is now offside on a one day repricing of the entire group. You either add here and call the panic overdone, or you admit the thesis just got a lot more crowded than you thought.

Alphabet $GOOGL ( ▲ 3.68% )  

Selling $85 billion in fresh stock to fund its AI buildout, Berkshire in for $10 billion. A company sitting on this much cash doesn't tap the market unless it's worried capital won't be this cheap for long.

Eli Lilly $LLY ( ▲ 4.31% )  

Sits near record highs and is leading the healthcare bid propping up the Dow. Calls outran puts two to one yesterday. Healthcare is rotating out of crowded tech land right here, in real time.

Lululemon $LULU ( ▼ 0.88% )  

Cut its full year outlook on weak launches and bad press, down hard premarket. The tell isn't Lulu, it's everyone long a premium consumer name. If this is the high end shopper cracking and not just bad product, the read through hits every retailer that's been coasting on the wealthy customer.

ServiceTitan $TTAN ( ▲ 2.34% )  

The rare green name, up big after raising guidance. On a day the whole tape is selling software, a clean beat and raise still got paid. If you're long quality names getting dragged down in sympathy, this is your evidence the selling is positioning, not fundamentals.

What to Watch

IPO’s

MarketBeat did an excellent job on this free IPO guide.

SpaceX IPO And Index Dispersion (Next Week) 

SpaceX prices next week, and S&P just refused to fast-track it, Anthropic and OpenAI into the 500, parking billions in forced buying for at least a year. Nasdaq went the other way.

Apple WWDC (Next Week) 

Apple is expected to unveil a rebuilt Siri running on Google's Gemini. The real question is whether it turns its install base into an AI business or just rents someone else's models.

- John

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