Source: Fortune
Summary
The U.S. jobs market had a strong May, with payroll gains nearly double what analysts expected. However, the AI trade suffered, sending the Nasdaq down 4% and the S&P down 1.2%. The reaction confused the White House, with President Donald Trump posting on Truth Social that stocks should go up, not down. The combination of high demand and constrained supply is driving inflation, and the labor market’s strength signals that the Fed may need to raise interest rates. The AI buildout is driving a historic appetite for capital, with hyperscalers on pace to spend close to a trillion dollars a year on data centers and chips.
Our Reading
The numbers tell one story.
The Nasdaq’s 4% drop was the worst day in over a year, with AI companies valued on future revenue feeling the pressure. The 10-year Treasury yield jumped to 4.54%, and futures markets priced better-than-60% odds of a rate hike by year-end. Barclays’ research identified that the dynamic becomes especially acute as the yield approaches 5%. The market is pricing in the risk of higher interest rates, and the AI trade is feeling the heat. The repricing might come at a welcome moment for the IPO pipeline, with SpaceX debuting at a $1.77 trillion valuation.
The announcement sounds familiar: investors are rotating into classic companies like Coca-Cola and Colgate-Palmolive, whose profits arrive now, not in five years.
