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Morning Bid U.S.

A Reuters Open Interest newsletter

What matters in U.S. and global markets today

By Mike Dolan, Editor-at-Large, Finance & Markets

Wall Street is holding its breath after Friday’s withering chip sector selloff, as tech stocks around the world fell back sharply in response on Monday.

Red-hot chip stocks have been knocked back by a combination of last week's earnings disappointment from Broadcom, a loss of momentum as the S&P 500’s nine-week winning streak came to an end, and rising Fed rate-hike bets after Friday’s robust May payrolls report.

I’ll get into that and more below.

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Today's Market Minute

Israel said on Monday it hit a petrochemical plant in Iran's southwest, along with strikes elsewhere on military targets, after U.S. President Donald Trump reportedly told Israeli Prime Minister Benjamin Netanyahu to refrain from further attacks.
SpaceX has drawn investor demand of about $150 billion for its IPO, about double the $75 billion it is seeking to raise, said two people familiar with the matter.
Nvidia on Monday announced a series of deals in South Korea with tech giants including SK Hynix and ‌Naver, as it looks to secure crucial memory chips to power its AI ambitions.
The energy market remains surprisingly calm amid stop-start hostilities in the Middle East - even with today’s price moves - but that masks a host of unknowns about the true state of the oil market, argues ROI Energy Columnist Ron Bousso.
Stablecoins grab the headlines, but the bigger prize for private equity investors may lie in the digital “plumbing” that makes them work, argues Brookfield’s Anuj Ranjan.

Chip chill, jobs heat and war

The SOX semiconductor index plunged 10% on Friday alone, with Broadcom itself down 20% over two days and the broader Nasdaq off some 4% heading into the weekend. Futures tried to grab a toehold first thing on Monday, but tech-heavy Asia bourses nosedived and Europe’s STOXX 600 slid to a two-week low.

Adding to the angst, Iran and Israel traded direct missile strikes over the weekend for the first time since April, catapulting crude oil prices back up over 4% and aggravating rate-hike expectations. Markets now see an almost 80% chance of a hike by year-end and almost two hikes within 12 months. Treasury yields are back on the rise.

All this had President Trump fighting multiple fires over the weekend, urging against interest rate rises and renewing calls for cuts instead. At the same time, his call on Israel not to retaliate against Iranian strikes on Sunday went unheeded. The fresh fighting dampens hopes of a comprehensive peace deal that would free up oil supplies.

With equity markets resetting as they take in all the new information, they’re also bracing for the mega SpaceX IPO, which is expected on Friday.

While analysts reckon the wave of IPOs expected this summer can likely be offset by a record pace of buybacks, there is concern about a parallel wave of equity financing by the so-called hyperscalers amid the gigantic AI investment buildout. Alphabet announced some $80 billion of new equity sales last week and there are reports Meta is set to follow suit.

Meantime, in Europe, markets are bracing for a long-awaited European Central Bank rate rise on Thursday. Despite this, the dollar has strengthened against the euro on the changing Fed horizon.

Today's key chart

Graphics are produced by Reuters.

The U.S. economy posted a third straight month of strong job gains in May, with payrolls increasing by 172,000, more than twice what was forecast. The economy also added 93,000 more jobs in March and April than previously esti