Following last week's rollercoaster ride in US stocks, driven by fluctuating market sentiment towards AI spending prospects, investors are bracing for a series of significant events this week, coinciding with the "nonfarm payrolls week." Due to the US Independence Day holiday, this is a shortened trading week, with the US stock market closed on Friday.
The most critical event will be the release of the US June nonfarm employment report on Thursday. However, a series of other employment indicators, including the JOLTS job openings data, the ADP private-sector employment report, and layoff announcements, will provide ongoing clues about the economic landscape throughout the week.
Consumer confidence surveys, along with economic activity data from S&P Global and the Institute for Supply Management (ISM), are also key focal points. The corporate earnings calendar is relatively light, but one heavyweight report stands out: Nike (NYSE: NKE) is scheduled to report its results on Tuesday.
Additionally, Federal Reserve Governor Christopher Waller will make his second public speech since taking office on Wednesday at the European Central Bank's global central banking forum, where he will share the stage with the heads of the ECB, Bank of England, and Bank of Canada. His first speech already caused a market stir. In this week's address, Waller is expected to continue emphasizing a "data-dependent" approach to policy and inflation concerns, and may further explain the rationale behind abandoning forward guidance.
It is worth noting that the US Supreme Court could rule as early as Monday on whether Fed Governor Lisa Cook can remain in her position. Last year, the President announced her dismissal, citing issues with a mortgage application, though it was widely understood the real motive was to install a preferred candidate. A ruling in favor of the President could set a precedent for future presidents to arbitrarily replace Fed officials they dislike, potentially severely undermining the Fed's independence and triggering a market sell-off.
Middle East Tensions Resurface
On June 28, a senior US official revealed that the US and Iran had agreed to halt mutual attacks and planned to meet in Doha, Qatar, on June 30 to address disputes concerning the Strait of Hormuz. Another US official stated that both sides would "temporarily" cease hostilities, allowing "vessels to pass freely" through the strait while technical talks continued. US officials and other informed sources confirmed the planned June 30 meeting, though neither Iran, the US, nor the mediating parties, Pakistan and Qatar, have issued formal statements.
It was reported that on June 27, US forces conducted strikes on multiple targets inside Iran, citing Iranian attacks on commercial vessels near the Strait of Hormuz. Iran's Islamic Revolutionary Guard Corps stated on June 28 that it had delivered a "decisive response" to recent US "aggression" and would deal more harshly with "violating" vessels in the future, threatening "hellish" strikes on US military bases. This marks another round of military friction between the US and Iran over navigation in the Strait of Hormuz.
Media and analysts suggest this latest military confrontation stems from the ongoing struggle for control over the strait's shipping lanes. Iran aims to strengthen its control, insisting vessels use the northern channel approved by Iran along its coast, and warning against using other routes. The attacked Singapore-flagged cargo ship was reportedly sailing along the Omani coast. Experts believe Iran seeks to consolidate its bargaining power in future negotiations by forcing ships to use the Iranian-side channel.
The US, meanwhile, appears to be using limited military strikes to assert initiative in the strait dispute and establish deterrence. Analysts note that after repeatedly declaring the strait would be fully open, failing to respond to the cargo ship attack would have weakened the US position and its credibility in regional security matters. The sudden military exchange, occurring as technical talks were set to resume, has raised concerns about renewed Middle East tensions. However, analysts believe the scale of actions is limited and unlikely to escalate into a major conflict.
This exchange also highlights the ambiguity and fragility of the US-Iran understanding. The memorandum's vague wording, stating Iran will "make its best efforts to arrange for" safe passage without specifying methods, led to differing interpretations and the military clash. Analysts point out the memorandum is more a document of principles, lacking consensus on implementation details. This incident is likely to further erode the already weak trust between the parties, casting doubt on each other's commitment to agreements and adding uncertainty to upcoming technical talks.
Key Employment Data Looms: Market Awaits Crucial US Economic Health Check
Despite indications that finding a job is becoming increasingly difficult, and the AI wave prompting many firms to reassess hiring needs, the overall labor market has so far remained satisfactory for the most important judge—the Federal Reserve. As the Fed's focus shifts increasingly towards the other half of its dual mandate—controlling inflation—its earlier concerns about the labor market have largely subsided.
However, Thursday's June employment report, along with other labor market data, will provide crucial context for gauging how "hot" the US economy truly is. A re-accelerating labor market would signal heightened inflation risks, reinforcing the Fed's hawkish stance and diminishing its inclination to cut rates. Surveys currently forecast the US added 123,000 jobs in June, with the unemployment rate holding steady at 4.3%.
Meanwhile, oil prices are declining. Last Friday, global benchmark Brent crude fell below $70 per barrel. While gasoline prices are retreating slowly, the national average has dropped to $3.90 per gallon, according to AAA. This overall trend aids disinflation—a primary concern for Governor Waller and the Fed—but it may also introduce new complications.
Apollo Global Management's Chief Economist Torsten Slok noted last week that markets could easily interpret falling oil prices as "disinflation," potentially further stimulating demand in an already robust economy. Slok wrote, "The market narrative has now shifted to the Strait of Hormuz reopening further heating up the economy and forcing the Fed to hike soon."
Market Questions AI Trade
Last week, memory chip stocks experienced significant volatility. While Micron Technology's (NASDAQ: MU) strong earnings report, which highlighted locked-in demand for years ahead, was a positive signal for the AI infrastructure investment thesis, news of OpenAI delaying its IPO sparked fresh investor concerns. Investors began asking the obvious question: why? And further: what exactly is wrong?
Simultaneously, AI demand might be starting to justify the massive investments in data center infrastructure for the first time. Previously, investors worried that the free cash flow of hyperscale cloud companies was being entirely consumed by AI capital expenditures. If AI-related revenue finally begins to catch up, it would clearly demonstrate these big bets are paying off.
In the early stages of the AI boom, market discussion centered almost entirely on supply—investment scale, chip sales, and computing power build-out. The next crucial phase will be measuring AI demand: how many people are actually using it. However, with many AI firms still private and OpenAI potentially remaining so, data reflecting true demand remains scarce.
While awaiting such data, one thing became clear from Micron's impressive report last week: the cost pressure within the AI supply chain is becoming immense. This cost pressure is forcing industry leaders like Apple (NASDAQ: AAPL) and Microsoft to raise prices.
On June 25, Apple announced price increases for Macs, iPads, and home devices to cope with cost pressures from unprecedented shortages of memory chips and storage, driven by AI data center expansion. An Apple spokesperson cited an "extraordinary surge in demand for memory and storage" from the rapid AI data center build-out, stating the company had "never seen component prices rise so fast and so much," and had absorbed costs for consumers but "now had to start raising prices."
Hours later, Microsoft announced that consumers would face higher prices for Xbox consoles due to rising key component costs, primarily from significant increases in storage and memory prices, which have "more than doubled and are expected to double again by Fall 2027."
Since the second half of 2025, the global memory chip sector has seen a rare broad-based price surge, with tight supply for DRAM like LPDDR used in smartphones. Market research firm Counterpoint estimates LPDDR4/5 prices in Q2 2026 are about double those of Q4 2025. The price hikes by Apple and Microsoft signal that upstream cost increases have exceeded even these giants' ability to absorb them, meaning AI costs are beginning to flow from data centers to consumers.
The market is now questioning how long upstream profits can last if consumers are unwilling to bear these AI costs. The moves by Apple and Microsoft suggest that enhanced industry pricing power may come at the expense of future demand, prompting a broad re-evaluation of AI-related semiconductor stocks.
Saxo Bank's Chief Investment Strategist, Charu Chanana, stated, "The memory chip rally still has momentum, but the positive drivers have become more selective, while the negative ones cover a broader market. The risk is that a stronger memory chip cycle today could weigh on the broader AI thematic tomorrow, and the market has already started pricing this in."
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