The best-performing sector of the first half just had its worst day since June 5.
Chip stocks led the market lower in the first session of the second half. Micron fell 8% to around $1,061. SanDisk dropped 10%. AMD lost nearly 7%. Intel sank 9%. Applied Materials fell 10%.
These are stocks that rallied 80% to 300% in the first half. Micron alone was up 305% through Tuesday's close. The selling was institutional rebalancing colliding with three fresh headwinds: a Cleveland Fed official suggesting the U.S. may need higher rates, a class-action lawsuit alleging Samsung, SK Hynix, and Micron coordinated to restrict DRAM supply and inflate prices by 700%, and buyers from PC makers to hyperscalers signaling they may start conserving memory rather than stockpiling it.
None of that kills the AI buildout thesis. But it resets who profits from it. When the stocks that led H1 start H2 with the sharpest selloff in a month, capital has to go somewhere else. Utilities with data center exposure, power infrastructure names, and companies selling picks-and-shovels to the AI supply chain without triple-digit valuations all sit at the front of that rotation.
Bloom Energy offered one example Wednesday. The fuel cell maker expanded its partnership with Brookfield from $5 billion to $25 billion to finance and deploy on-site power systems for AI data centers. The stock jumped 12%. That is not a chip stock. It is an infrastructure stock solving the bottleneck that chip stocks created: AI needs power faster than the grid can deliver it.
The jobs number lands at 8:30 this morning.
ADP's June reading came in at 98,000, below the 110,000 consensus and down from 122,000 in May. ISM Manufacturing slipped to 53.3 from 54.0, with the employment component still in contraction at 49.7. The labor market is softening, but not breaking.
Consensus for this morning's nonfarm payrolls sits near 115,000, a sharp drop from May's 172,000 surprise. The unemployment rate is expected to hold at 4.3%. A soft print would strengthen the case for rate relief in September and give small caps another push higher. A hot number keeps the rate-hike path alive and sends the 10-year higher.
Markets are closed Friday for the Fourth of July. This is the last major data point before the three-day weekend. It will set the tone for the first full trading week of Q3.
Wednesday's close.
The S&P 500 finished at 7,483, down 0.2%. The Dow slipped 14 points to 52,305. The Nasdaq fell 0.7% to 26,040, dragged lower by the chip selloff.
The 10-year yield eased to 4.40%. Gold ticked higher to around $4,070. Oil is trading near $68 with WTI at its lowest since early March as Strait of Hormuz shipping continues to recover. Bitcoin is around $58,500.
Futures are slightly lower ahead of the report.
That's the read.
