Stock markets enjoyed what looked like an endless uptrend to all-time highs since February. For a time, it dismissed the U.S. and Israel bombing Iran, which caused the Strait of Hormuz to close since then. That ended last Friday, June 5, when the BLS reported 172,000 jobs added in May.
Economists expected 80,000 job additions. The large difference between the two figures is a result of the local/state government adding 52,000 jobs. Leisure and hospitality added 70,000 jobs. This is above the monthly average of 14,000/month. Firms likely hired staff ahead of FIFA (soccer).
Stock markets reacted negatively. Nasdaq (QQQ) lost 4.77% on the day. They are upset because the odds have greatly increased for the Fed raising rates later this year. It boosted the U.S. Dollar (UUP) (DXY). The currency strengthened, since U.S. debt is more attractive when treasury bond yields rise. That could hurt the 20+ year bond (TLT) and the 7-10 year bond ETF (IEF).
The day before that report, Broadcom (AVGO), equivalent to DIY Group's pick Taiwan Semiconductor (TSM), posted quarterly results. AVGO stock lost 12%, then another 4% the next day. That sent South Korea’s chip-heavy index lower and set up Friday’s steep sell-off.
That wiped $1T of market capitalization. Yet markets are up by $5.76T since Feb.
Traders who bought stocks at the all-time high may have invested at the top. Long-term investors who built a position just before the Iran invasion started are still ahead. The semiconductor ETF (SOXX), for example, is up by 79.2% YTD.
