Investors’ focus, away from the much-hyped SpaceX IPO, will be the coming week’s consumer price index for May.
Did you hear a bell?
Whatever the sound, a sudden reversal of stocks’ furious rally of the past two months does seem to be sending signals, along with ones from credit, currencies, and commodities.
The S&P 500 ended its nine-week winning streak· after the Nasdaq Composite plunged 4.2% on Friday, its worst drop since April 2025. Artificial-intelligence-powered tech, which had fueled the recent furious advance, took the biggest hit. The State Street Technology Select Sector SPDR exchange-traded fund slid a satanic 6.66% on Friday, for a three-day loss of 9.1%. That still leaves it up 25% year to date, however.
The coming initial public offering of SpaceX took some of the blame for the tech selloff. The thinking is that investors would be ringing the register to buy into what’s likely to be the biggest IPO on record, slated to raise $75 billion when it’s priced this coming Thursday.
And that’s after Google parent Alphabet raised $85 billion in equity capital earlier this past week, and ahead of anticipated IPOs from Anthropic and OpenAI. Big equity financings tend to come near market tops when companies can get the best prices for their shares.
READ MORE UP AND DOWN WALL STREET
More fundamentally, all the markets are looking ahead to tighter money, especially after another blowout jobs report this past Friday. Nonfarm payrolls jumped by 172,000 in May, about twice the consensus forecast, on top of upward revisions totaling 93,000 in the prior two months.
Many observers noted an outsize jump last month of 70,000 leisure and hospitality workers, which seemed related to the coming World Cup. But Piper Sandler’s economics team led by Nancy Lazar pointed out that strong jobs growth has followed the Federal Reserve’s prior rate cuts totaling 1.75 percentage points in 2024 and 2025 with the typical time lag.
Following the jobs data, futures market on Friday put a 71.8% probability of at least a quarter-percentage-point hike in the Fed’s current target range of 3.50% to 3.75% by December, according to the CME FedWatch site. With that prospect, the 10-year Treasury yield popped back above 4.50% (the level that has tended to give stocks trouble), while pushing up the dollar and gold down another $223 Friday, to $4,337.10, off over 18% from its late January peak.
Investors’ focus, away from the much-hyped SpaceX IPO, will be the coming week’s consumer price index for May. The consensus forecast calls for a 4.2% year-over-year rise. Bank of America’s strategists observed in a client note that when the jobless rate is below the CPI, Wall Street typically suffers, as in 1966, 1973, 1990, 2000, 2008, and 2021. That would be more than a mere tintinnabulation.
Write to Randall W. Forsyth at randall.forsyth@barrons.com