Hot Town

Summer in the City

Back of neck getting dirty and gritty

Good morning and Happy Jobs Day.

It’s not quite as exciting as the Orange Crop report in Trading Places, but with markets closed tomorrow in observance of July 4th, today’s non-farm payroll data will have to do on a very hot day in NYC. Yesterday the S&P 500 began the 2H by falling 0.2%, but the equal-weight rose 0.3%. The Russell 2000 fell 0.4%. Treasury yields were slightly lower and Brent crude fell over 2%. The S&P rallied off its early session low of 7450 and managed to trade in the green for most of the rest of the day before fading into the close. A rotation out of the high-flying momentum trade, especially chip/memory, and into lagging areas like software and hyperscalers was the main market dynamic to start the second half. While that reversion trade may have been lined up anyway, a report from Bloomberg that Meta may sell excess compute capacity to external customers proved highly coincidental. Meta rallied sharply (along with the other hyperscalers) and neoclouds/nuevo HPC entrants sold off, along with AI hardware/chip names.

S&P futures were slightly higher this morning into the payroll data, moving off session lows in the early morning. Asian tech stocks got smacked overnight like the Yankees bullpen following yesterday’s US price action, but Europe is trading higher. The US tech names that got slammed yesterday are seeing modest bounces in the pre-market (MU +3%) while Meta gives back just a little of the 9% gain. Nvidia announced it will be partnering with AI cloud companies (like the ones that got hit yesterday) in creating revenue-sharing and financing support models. The payroll data came in weaker than expected, including last month’s number getting revised lower. Treasury yields and the Dollar fell and S&P futures jumped.