One Jobs Report Just Cost the Fed Its Confidence – Chipmakers Couldn’t Be Happier
A soft June jobs number just gave the Fed some breathing room, while chipmakers keep proving AI’s real money is in hardware, not software.
Markets closed a shaky, holiday-shortened week with the S&P 500 flat, the Nasdaq down 0.8%, and the Dow up 1.1%. Now traders are bracing for a quieter stretch, with Monday’s services PMI data likely to set the tone.
The Jobs Miss That Shook Rate Bets
June payrolls added just 57,000 jobs, roughly half of what economists expected. Worse, the government also slashed its earlier estimates: May’s job gains dropped from 172,000 to 129,000, and April got cut from 179,000 to 148,000.
That was enough to shake confidence in a Fed rate hike this year. Odds fell from about 84% on Wednesday to 75% by Thursday, according to CME data. Fed Chair Kevin Warsh, though, kept his focus on inflation, still stuck above the Fed’s 2% goal thanks to lingering fallout from the Iran war and the energy shock that followed.
Chips Are Eating Software’s Lunch
While tech broadly struggled – the IGV software ETF is down 12% this year, and the Magnificent Seven have lost 2% – chipmakers are having a historic run. Micron is up 308% year-to-date, Intel has jumped 280%, and AMD has gained 173%. The Philadelphia Semiconductor Index has returned about 75% since January.
Why Traders Should Care
Bank of America’s Vivek Arya says the AI trade is shifting from chasing returns to solving real physical bottlenecks like chip supply and power capacity. Memory shortages and rising prices, he notes, are now the key variables to watch.
What’s Next
Watch Thursday’s PepsiCo earnings for consumer health signals, and Friday’s Delta results for a read on lingering energy costs.
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Source: Yahoo Finance
