Today
It’s another breather for the AI rally this morning, with Nasdaq futures leading the decline ahead of today’s opening. The break is not limited to the U.S., with South Korea’s Kospi index down -5.5%, pulled lower by chipmaker SK Hynix, which plunged over -10% in Friday’s session, pulling the stock back below the US$1 trillion mark that it only reached a little over a week ago. Easy come, easy go. Even with today’s pullback, SK Hynix is still up +200% year-to-date, while the Kospi Index has nearly doubled. Also weighing on AI sentiment is S&P Dow Jones Indices’ decision not to fast-track newly public companies into the S&P 500, maintaining its 12-month seasoning requirement. The decision could delay billions of dollars in passive fund flows to future AI-related IPOs such as SpaceX, OpenAI, and Anthropic. Investors are also digesting May employment reports from both the U.S. and Canada this morning, including the first major economic release under new Fed Chair Kevin Warsh. More on the results below.
Labour market data surprised to the upside on both sides of the border in May. In Canada, employment rose by 87,800 jobs versus expectations for 10,000, driving the unemployment rate down to 6.6% from 6.9%, with gains led by full-time positions in construction, transportation, and recreation. Ontario added 42,000 jobs, youth unemployment improved, and wage growth slowed to 3.2% from 4.8%, suggesting labour market inflation pressures remain contained. In the U.S., employers added 172,000 jobs, nearly double expectations, while unemployment held at 4.3%. Combined with upward revisions to prior months, the report points to a more resilient economy than many investors expected. The stronger-than-expected data pushed Treasury yields higher and increased expectations that the Fed may need to keep policy tighter for longer, particularly with energy prices remaining elevated following the Iran conflict.
AI trade takes a day off. Yesterday’s session saw investors rotate out of semiconductor stocks and back into more “old-school” sectors tied to a resilient economy after Broadcom’s outlook failed to meet expectations. While the Nasdaq 100 slipped 0.5% on weakness in chipmakers and AI-linked names, the broader market remained resilient, with roughly 360 companies in the S&P 500 advancing and helping the index gain 0.4%. Still, the S&P 500 is at risk of ending its nine-week winning streak after the disappointing reaction to earnings from Broadcom. The Dow Jones Industrial Average led the way, rising 1.7% to a record high, its 15th record close of the year. Gains were led by UnitedHealth Group, which rose 5.2% following an upgrade from Bank of America, while Goldman Sachs gained 5%. Broad participation outside the tech sector suggests investors may be rotating within equities rather than abandoning risk altogether, with the pullback in chip stocks viewed by some as a healthy pause following one of the sector’s strongest runs in decades. Canada bucked the trend, with tech names Constellation Software and Descartes among the TSX’s top performers following Mark Carney’s announcement of a national AI Strategy.
The likelihood of a June rate hike from the BOJ increased after Governor Kazuo Ueda signaled that policymakers are becoming more concerned about inflation risks than economic growth risks. Ueda argued that the rise in energy prices caused by the Iran war could generate lasting second-round inflation effects, rather than the temporary price shock that central banks often look through. He warned that delaying action could force the BOJ to implement much larger rate hikes later, potentially causing greater economic and financial market disruptions. The hawkish comments pushed the yen higher and reinforced expectations that the policy rate could rise to 1.0% from 0.75% at the June meeting. The comments are significant because Japan has spent decades battling deflation and weak inflation, making the BOJ historically cautious about tightening policy. However, with wholesale inflation at a three-year high, stronger wage growth, and concerns that rising energy costs may become embedded in broader pricing behavior, the central bank now appears more willing to prioritize inflation control even if it means accepting slower economic growth.
AI for All. Canada’s new national AI strategy is designed to address what the government calls a significant AI adoption gap, with fewer than 15% of Canadian businesses currently using AI to produce goods or services and Canada lagging its peers in AI literacy, workforce training, and public trust. The strategy focuses on expanding AI adoption through free introductory AI training for all Canadians, providing post-secondary students with access to trusted AI tools, investing $500 million to accelerate AI commercialization, and creating a $500 million Canadian Tech Growth Fund to support domestic AI companies. At the same time, the government is emphasizing trust and safety, promising legislation to address concerns around chatbot safety, surveillance pricing, and privacy protection. The plan aims to create up to 90,000 AI-related jobs while promoting an approach that uses AI to improve efficiency rather than replace workers. The strategy also shows that Canada is looking to reduce dependence on foreign cloud infrastructure and retain domestic AI talent.
IPO Meets Washington. As SpaceX prepares for what could become the largest IPO in history, financial disclosures show that ten Trump administration officials reported holdings in either SpaceX or xAI worth between $9.9 million and $43.8 million. The offering is expected to value the company at roughly $1.8 trillion and could create substantial wealth for employees, insiders, and existing investors. SpaceX stands out for both the potential size of its IPO and its extensive government relationships. The company received approximately $4 billion in federal transactions in fiscal 2025 and was awarded an additional $6.5 billion in U.S. Space Force contracts last month to provide communications and missile-warning satellites. While ethics rules and recusal requirements apply, legal experts say there are few historical precedents for an IPO of this size involving a major government contractor with ownership interests held by senior administration officials.
Diversion:
Threading the needle
