In 30 seconds: The Nasdaq 100 fell nearly 5% in its biggest single-day drop since Liberation Day, with the tech sector down over 7% on the week, while money rotated into health care, utilities, and dividend stocks, with Micron alone losing $94 billion in market cap. With Bitcoin down 53% from its peak, analysts are dissecting the structural bear case for MicroStrategy and its preferred stock STRC, arguing that an inability to issue new equity or preferred at acceptable prices could force dividend cuts or BTC liquidation, threatening the entire leveraged BTC treasury model. The ongoing closure of the Strait of Hormuz amid the Iran war is rapidly depleting US Gulf Coast crude inventories, spiking container shipping rates, and pressuring global supply chains, while a potential US-Iran peace deal reportedly hinges on the release of $24 billion in frozen Iranian assets. The US added 172,000 jobs in May, far exceeding the 88,000 consensus forecast, with large upward revisions to prior months, pushing markets to fully price in a Fed rate hike by year-end and reigniting debate over whether the Fed's 2025 insurance cuts should be reversed.
The S&P 500 shed 2.6%, its largest one-day decline since last October. If you are wondering whether the money left the building: it did not. It found the room nobody has wanted to sit in for five years: Health Care. The concentration problem is now visible in reverse. Zoom out slightly and 23 of the top 25 S&P 500 performers since the March low were tech stocks. Going wider, 41 of the top 50 S&P 500 performers since the March low were tech. When a trade gets that crowded, the exit is narrow. Nasdaq 100 $QQQ down more than 4% to end the week. The rotation was stark: the Nasdaq 100 dropped more than 4% to end the week while dividend ETFs climbed 0.75%. The options market reflected the stress. The VIX closed at 20.99, up roughly 36% on the day, jumping from 15.4. Crude and the S&P 500 were falling tightly together — a co-movement that hasn't been seen in a while.
The bear case is what happens when the music stops. Bitcoin down 53% from its peak last October. STRC: 12.5%. That is a lot of cash for a company whose primary asset generates no income. The bull rebuttal focuses on the balance sheet. MSTR recently eliminated 18% of its debt by repurchasing 1.5 billion of converts in cash. Total notional debt stands at 6.7 billion against 843,000 BTC in holdings. The company also sold a token position of 32 coins, drawing outsized attention. The analogy to Cathie Wood / ARKK is instructive. That fund gathered most of its capital in 2020 and 2021 and deployed it into overpriced assets, leaving shareholders in a significant drawdown. Every bear case, ultimately, depends on BTC going down.
The Strait of Hormuz closure is straining the physical oil market. Gulf Coast crude inventories have drawn down roughly seven times the historical average pace since mid-April. The scramble for non-Gulf barrels is visible in differentials. Dalia crude differential to Dated Brent surged to plus $10.6 a barrel in April, cooled to plus $3.5 in May, and by June had flipped to minus $1.8. New York Fed Global Supply Chain Pressure Index: 1.77. The Drewry World Container Index (WCI) hit $3,433 per 40-foot container, up 23% over the past week. The New York Fed Global Supply Chain Pressure Index printed 1.77 in May, still elevated and signaling continued strains in global supply chains, in part due to the Iran war. An annual average surplus in a year in which Hormuz was closed for 3-6 months is, to put it mildly, something. Meanwhile, diplomacy has a price tag. United States holding frozen Iranian assets. The broader concern is what all of this costs: funding a $2 trillion deficit, an Iran war, and existing debt rollover simultaneously. Kazakhstan cuts rates.
Average hourly earnings rose to $37.53 in May, up 0.32% on the month from $37.41.
Here is what moved this week.
S&P 500: 7,383.74, down 2.64% on the day
Gold: $4,338.00, down 3.08% on the day
US Dollar (DXY): 100.10, up 0.69% on the day
WTI crude: $90.38, down 2.86% on the day
Gas (per gallon): $4.30, down 3.80% on the week
30-year fixed mortgage: 6.48%, down 5 bp on the week
Initial jobless claims: 225,000, up 6.13% on the week
Continuing claims: 1,777,000, down 0.45% on the week
Average hourly earnings: $37.53, up 0.32% on the month