KEY POINTS
- S&P 500 futures indicate a cautious open Monday after the index plunged 2.6% on Friday to 7,383, erasing its midweek record close above 7,600.
- A semiconductor rout triggered by Broadcom's stalled AI guidance wiped more than $1 trillion from chip stocks in two sessions, dragging the iShares Semiconductor ETF down 10% on Friday alone.
- Traders face a gauntlet this week: May CPI lands Wednesday, the ECB decides on rates Thursday, and the FOMC meets June 16-17 with rate-hike odds now at 60% for year-end.
Wall Street opens Monday morning staring at the wreckage of its worst week since April 2025. The S&P 500 closed Friday at 7,383.74, a full 3% below the all-time high of 7,609.78 it set just three days earlier on June 2. The Nasdaq Composite cratered 4.18% to 25,709.43, its steepest single-session loss in more than a year. The Dow shed 695 points to close at 50,866.78. Prediction markets price the probability of a positive S&P 500 close today at just 55%, reflecting thin conviction after Friday's carnage.
A Record That Lasted Three Days
The speed of the reversal is striking. On Tuesday, June 2, the S&P 500 posted its 24th record close of 2026, crossing 7,600 for the first time in history. Chipmakers powered the rally. Marvell Technology surged 32.5% in a single session after Nvidia CEO Jensen Huang called it "the next trillion-dollar company" at Computex in Taipei. Hewlett Packard Enterprise beat estimates. The AI infrastructure trade looked unstoppable.
Then Broadcom reported earnings after the close on June 3. The company guided Q3 AI semiconductor revenue to $16 billion, below the Street's $17.2 billion estimate, and declined to raise its full-year AI chip forecast of $56 billion. The stock dropped 12.6% on Thursday, and the contagion spread fast. Marvell gave back 16% on Friday. Intel and AMD each fell about 11%. Micron, which had broken above $1,000 per share for the first time on June 1, shed 13% to close at $989. The iShares Semiconductor ETF suffered its worst day since March 2020.
Jobs Data Poured Fuel on the Fire
The Friday morning nonfarm payrolls report made things worse. The economy added 172,000 jobs in May, more than double the 80,000 consensus. Unemployment held at 4.3%. The 10-year Treasury yield spiked 6 basis points to 4.54%, its highest since May 21. Rate-cut hopes evaporated. Fed funds futures now price a roughly 60% chance of at least one rate hike by year-end, up from 50% before the data.
The bond market's message is blunt: the Fed is not coming to the rescue. New Chairman Kevin Warsh has been clear that he views inflation as the primary threat, and the May jobs number hands him the data to stay hawkish. His first FOMC press conference on June 17 will set the tone for the second half of 2026.
A Week That Could Define the Quarter
Monday's session opens into a catalyst-heavy week. The May CPI report drops Wednesday at 8:30 a.m. Eastern. April's reading came in at 3.8% year-over-year, the hottest since May 2023, driven by energy prices that were up 17.9% annually amid the Iran conflict. Economists expect headline CPI to print around 4.2% year-over-year for May, which would mark a further acceleration. Core CPI, which stripped out food and energy at 2.8% in April, is the number the Fed watches most closely.
The ECB meets Thursday, with Bloomberg surveys projecting a 25-basis-point hike to 2.25% as eurozone inflation hit 3% in April. If the ECB tightens, global bond yields will feel the pressure, adding another headwind for U.S. equity valuations already stretched by the AI premium.
For traders scanning for a bounce, the S&P 500's 50-day moving average sits near 7,350. A break below that level on heavy volume would signal something more than a garden-variety correction. Hold above it, and the pullback looks like a healthy reset before the FOMC. The next five trading days will tell us which it is.
