Stocks entered last week riding May’s momentum and left it questioning the Federal Reserve’s next move. Strong payrolls and persistent inflation kept the central bank firmly on hold under new Fed Chair Kevin Warsh, quietly burying what was left of rate-cut optimism. For markets right now, good economic news is bad news.

 

However, the late-May rally didn't last. What looked like a contained pullback at the index level was messier underneath, as rising yields sent investors rushing out of some sectors and into others. A selloff in chip stocks, which had been among the market's biggest winners, led the week's losses.

 

 

Stock Index Performance 

• The S&P 500 dropped 2.59%.
• The Nasdaq 100 tumbled 4.53%.
• The Dow Jones Industrial Average dipped 0.32%.

 

What’s Moving Markets

 

The labor market is cooling, but not enough for the Fed to act. The May 2026 jobs report came out on June 5 and showed that the economy added 172,000 jobs, more than double what economists expected, and the unemployment rate held steady at 4.3% for a third straight month. Job creation is slowing, but not fast enough to push the Fed toward cuts. If anything, the strength in hiring gives the central bank more reason to wait.

 

100 Days of War in Iran. Over the weekend, the war in Iran officially reached the 100-day mark. Since the conflict began on February 28, 2026, oil prices have experienced significant turbulence. The effects of this turbulence have rippled across the United States economy, leading to inflated prices beyond the pump. Iran and the United States are in a delicate ceasefire, with leaders of both nations sending mixed messages on the future of the conflict.

 

Stocks pulled back as the rate picture changed. Last week snapped nine straight weeks of gains, as rising yields put pressure on valuations. The damage was not evenly distributed. Technology and consumer discretionary bore the brunt of the decline, while health care and consumer staples held up relatively well. The earnings picture has not materially changed, but when yields rise sharply, even strong long-term growth stories like artificial intelligence are not immune from valuation pressure.

 

 

The Week Ahead

 

Two inflation reports will set the tone for markets this week. June 10th's Consumer Price Index (CPI) and June 11th's Producer Price Index (PPI) releases of May data are the most closely watched releases ahead of the June 16th Federal Reserve meeting, and both carry real consequences for rate expectations. With inflation still running above 3%, any upside surprise will strengthen the case for a hike later this year.

 

Investors will want to watch whether last week's shift out of technology and into defensive areas like health care and consumer staples continues to hold. A key warning sign is credit spreads, the extra yield corporate bonds pay above U.S. Treasuries to compensate for default risk. As long as they stay calm, the pullback in stocks looks like a valuation reset. If they start to widen, something more serious may be developing.

 

 

 

 

 

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