June S&P 500 E-Mini futures (ESM26) are down -0.31%, and June Nasdaq 100 E-Mini futures (NQM26) are down -0.88% this morning as investors continue to pull back from the AI trade, while cautiously awaiting the key U.S. jobs report.
Chip stocks extended their declines in pre-market trading after Broadcom’s AI-chip sales forecast missed expectations, fueling concerns that the rally in the AI trade may have run too far.
Sentiment took a further hit after S&P Dow Jones Indices said it would maintain its existing eligibility criteria for benchmarks such as the S&P 500. That means companies such as SpaceX, Anthropic PBC, and OpenAI would need to wait at least a year after their debut to be included in the U.S. benchmark.
Meanwhile, the price of WTI crude edged lower on Friday, with investors looking for signs of progress in U.S.-Iran peace talks. U.S. President Donald Trump said on Thursday that negotiations are in the “final” stages without providing further details. Still, clashes continued overnight between Hezbollah and Israel in southern Lebanon after the Iran-backed group rejected a U.S.-brokered ceasefire proposal. Iran is demanding a ceasefire in Lebanon as a precondition for agreeing to a deal with the U.S.
In yesterday’s trading session, Wall Street’s major indices ended mixed. Most members of the Magnificent Seven stocks advanced, with Alphabet (GOOGL) rising over +3% and Nvidia (NVDA) gaining nearly +2%. Also, UnitedHealth Group (UNH) climbed over +5% and was the top percentage gainer on the Dow after BofA upgraded the stock to Buy from Neutral with a price target of $450. In addition, bank stocks gained, with Goldman Sachs (GS) surging about +5% and JPMorgan Chase (JPM) rising over +3%. On the bearish side, Broadcom (AVGO) plunged more than -12% and was the top percentage loser on the Nasdaq 100 after the company issued below-consensus FQ3 AI semiconductor revenue guidance.
The Labor Department’s report on Thursday showed that the number of Americans filing for initial jobless claims in the past week rose by +13K to 225K, the highest level since February, compared with the 214K expected. Also, U.S. Q1 nonfarm productivity was revised lower to +0.3% q/q, weaker than expectations of +0.5% q/q, while unit labor costs were unexpectedly revised downward to +1.8% q/q, weaker than expectations of +2.4% q/q.
San Francisco Fed President Mary Daly said on Thursday that monetary policy is in a good place at the moment, but there is too much uncertainty in the economy to provide guidance on the future path of rates. “We are prepared to respond either way, whatever the economy brings,” Daly said. Also, Kansas City Fed President Jeff Schmid said the U.S. central bank now faces a choice between remaining patient and keeping interest rates steady or raising rates to tamp down inflation that has been above target for years.
U.S. rate futures have priced in a 96.4% chance of no rate change and a 3.6% chance of a 25 basis point rate cut at the upcoming monetary policy meeting.
Meanwhile, Fitch Ratings on Thursday cut its 2026 global growth forecast by 0.2 percentage points to 2.4%, citing the inflationary impact of higher energy costs and ongoing supply disruptions. “Forecast cuts have been widespread as higher inflation squeezes real wages, dampens consumption and raises companies’ input costs,” Fitch economists said.
Today, all eyes are focused on the U.S. monthly payroll report, which is set to be released in a couple of hours. Economists, on average, forecast that May Nonfarm Payrolls will come in at 85K, compared to the April figure of 115K.
Investors will also focus on U.S. Average Hourly Earnings data. Economists expect average hourly earnings to rise +0.3% m/m and +3.4% y/y in May, compared to +0.2% m/m and +3.6% y/y in April.
The U.S. Unemployment Rate will be reported today. Economists forecast that the jobless rate will remain steady at 4.3% in May.
“The U.S./Iran conflict and AI continue to dominate the market narrative, but [the May] jobs report is still very important for markets because the strong labor market is a critical offset for the consumer amidst high inflation,” said Tom Essaye of the Sevens Report. “A ‘too tight’ labor market would risk increasing the chances of Fed rate hikes sooner than expected.”
The Fed’s Consumer Credit report will be released today as well. Economists expect U.S. Consumer Credit to be $17.8 billion in April, compared to the previous figure of $24.9 billion.
In the bond market, the yield on the benchmark 10-year U.S. Treasury note is at 4.47%, down -0.25%.
The Euro Stoxx 50 Index is down -0.17% this morning, undermined by the cooling AI trade and heightened uncertainty over the Middle East conflict. Semiconductor stocks extended their declines on Friday as Broadcom’s forecast miss continued to weigh on sentiment. The lack of progress toward a Middle East deal also kept investors on edge. Still, the benchmark index is on track to end the week higher. Meanwhile, Eurostat said on Friday in its final estimate that the Eurozone’s economy shrank in the first quarter, led by declines in output in Ireland and France, complicating the European Central Bank’s task as it tries to rein in rising inflation without excessively harming economic activity. That marked the first quarterly contraction since October-December 2022, when energy prices surged following Russia’s full-scale invasion of Ukraine. In corporate news, Raspberry Pi (RPI.LN) soared over +25% after the single-board computing company boosted its annual profit guidance. At the same time, Bodycote (BOY.LN) tumbled more than -10% after saying Apollo Global Management does not plan to make a buyout offer for the firm.
France’s Industrial Production, Eurozone’s GDP, and Eurozone’s Employment Change data were released today.
The French April Industrial Production unexpectedly rose +0.1% m/m, stronger than expectations of -0.2% m/m.
Eurozone’s GDP fell -0.2% q/q and rose +0.3% y/y in the first quarter, weaker than expectations of +0.1% q/q and +0.8% y/y.
Eurozone’s Employment Change rose +0.1% q/q and +0.5% y/y in the first quarter, in line with expectations.
Asian stock markets today closed in the red. China’s Shanghai Composite Index (SHCOMP) closed down -0.74%, and Japan’s Nikkei 225 Stock Index (NIK) closed down -1.31%.
China’s Shanghai Composite Index closed lower today, tracking weakness across Asian markets as investors took profits in tech stocks. Chip and other AI-related stocks sank on Friday, taking a breather after a recent sharp rally, as a disappointing outlook from U.S. chipmaker Broadcom prompted investors to take profits. Limiting losses, financial and healthcare stocks advanced. The benchmark index notched a weekly loss. Investors also continued to monitor developments in the Middle East. The Iran-backed Hezbollah militia rejected a new ceasefire in Lebanon on Thursday, and Israel said it would not pull its troops out of the country. The latest developments undercut U.S. President Trump’s efforts to reach a peace deal with Iran, as Tehran has made a ceasefire in Lebanon a prerequisite for any agreement with Washington. Meanwhile, China’s central bank resumed cash injections through its daily liquidity operations on Friday after a two-day pause, but remained in net withdrawal mode from the banking system for the week. In corporate news, Hong Kong-listed shares of U.K. banks and insurers that conduct most of their business in Asia, such as Insurer Prudential PLC, Standard Chartered, and HSBC, slumped on Friday amid concerns that new regulations could restrict mainland Chinese investors’ use of Hong Kong bank accounts.
Japan’s Nikkei 225 Stock Index closed lower today, falling for a second straight session as enthusiasm for the AI trade cooled. Semiconductor stocks led the declines on Friday, tracking their U.S. peers’ overnight slide after AI chipmaker Broadcom issued guidance that fell short of expectations. Investors also remained cautious amid uncertainty surrounding the Middle East conflict, as the renewed Israel-Lebanon ceasefire showed signs of strain. Still, the benchmark index eked out a modest weekly gain. Government data released on Friday showed that Japan’s real wages rose 1.9% in April from a year earlier, marking a fourth straight monthly gain as higher special payments lifted overall earnings. Separate data showed that Japan’s annual household spending edged down in April, extending its streak of declines to five consecutive months. In addition, preliminary data showed that Japan’s leading economic indicators index, which gauges the economic outlook for a few months ahead based on data such as job offers and consumer sentiment, reached its highest level since December 2021 in April. Capital Economics economist Abhijit Surya said that continued wage growth strength gives the Bank of Japan the green light to resume tightening later this month. Elsewhere, Japanese Finance Minister Satsuki Katayama said on Friday that the country stands ready to act at any time in the foreign exchange market and reserves the right to take “decisive action” against excessive volatility. The Nikkei Volatility Index, which takes into account the implied volatility of Nikkei 225 options, closed down -3.70% to 28.37.
The Japanese April Household Spending rose +1.6% m/m and fell -0.5% y/y, stronger than expectations of +0.8% m/m and -1.5% y/y.
The Japanese April Leading Index stood at 115.9, stronger than expectations of 114.4.
Pre-Market U.S. Stock Movers
Chip stocks slid in pre-market trading, with Micron Technology (MU) falling over -3% and Marvell Technology (MRVL) dropping more than -2%.
Lululemon Athletica (LULU) plunged over -12% in pre-market trading after the athleisure retailer cut its full-year guidance.
DocuSign (DOCU) fell more than -4% in pre-market trading after the electronic-signature company maintained its full-year recurring revenue guidance, disappointing some investors who had anticipated an increase.
Fiserv (FISV) dropped over -1% in pre-market trading after BNP Paribas downgraded the stock to Underperform from Neutral with a $46 price target.
Chipotle Mexican Grill (CMG) rose more than +1% in pre-market trading after JPMorgan upgraded the stock to Overweight from Neutral with a price target of $35.
You can see more pre-market stock movers here
Today’s U.S. Earnings Spotlight: Friday - June 5th
ABM Industries (ABM), G-III Apparel Group (GIII), Here Group (HERE).
On the date of publication, Oleksandr Pylypenko did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
