Churning chips

The U.S. jobs report will clearly dominate the day ahead for markets, but there's been a hefty pullback in red-hot chip stocks around the world as the second half of the year gets underway. Given the shortened week, quarter-end trading quirks and the looming payrolls report, it may be unwise to read too much into this week's market moves, but it does appear there's some degree of profit-taking and portfolio shuffling going on. CHURNING CHIPS The U.S. SOX chip index fell back about 6% on Wednesday with no obvious trigger, even though the wider S&P 500 ended flat and the equal-weighted index hit new highs. Asia stocks took their lead from the SOX today, with sizeable declines in big chip and tech equipment makers in Seoul and Tokyo. Meta, which had lost about 15% in the first half of the year, was an outlier stateside, rising nearly 9% on Wednesday on a report that it was building out its cloud business and planned to sell excess AI computing capacity. Also on the tech front, the FT reported on Thursday that OpenAI would offer the U.S. government a 5% stake. Meantime, today's payrolls report is expected to show another brisk gain of 110,000 jobs last month - well above the so-called breakeven rate needed to keep the unemployment rate steady. There was a slight miss in ADP's private sector jobs report on Wednesday, but not enough to shift any Federal Reserve expectations. Fed Chair Kevin Warsh was equivocal in his take on things in Portugal on Wednesday, insisting the central bank was committed to getting inflation back to 2% but noting there had been improvement in the inflation picture in recent weeks. Although Fed futures still see a rate hike by October, crude oil prices continue to decline amid more positive noises about talks between U.S. and Iranian officials this week. Brent crude was trading at around $71 per barrel early on Thursday. And in Europe there was good news on the inflation front on Wednesday, as euro zone headline CPI came in at 2.8%, well below expectations for 3%. That offers some hope that the ECB can avoid further rate hikes now that energy prices are retreating. Elsewhere, the yen jumped sharply from Wednesday's 40-year low, as nerves about possible Bank of Japan intervention to support it jangled. Reuters reported that Japan's authorities are looking to adopt a more opportunistic currency intervention strategy, aimed at ambushing speculative bets rather than telegraphing plans in advance or drawing lines in the sand. Chart of the day If AI is going to destroy job creation, it's not happening yet. The U.S. economy posted a third straight month of strong job gains in May and another 100,000 or more are expected to be recorded for June when the monthly employment report is released later on Thursday. Employment gains have averaged 188,000 jobs per month over the past three months, nearly triple the comparable figure for the same period in 2025, and about 150,000 more than most estimates of the so-called breakeven rate that keeps the unemployment rate steady. Today's events to watch * U.S. June nonfarm payrolls (8:30 a.m. EDT), weekly jobless claims (8:30 a.m. EDT), May factory orders (10 a.m. EDT) * San Francisco Fed's Mary Daly speaks