Jobs, profit-taking and 2 other things that drove the stock market this week

The S&P 500 rose 1.5% for the week, driven by a strong May jobs report that eased recession fears and suggested manageable wage inflation, reinforcing market expectations for a potential future rate cut despite Fed Chair Powell's data-dependent stance. Separately, tensions flared between Trump and Musk, impacting Tesla's stock, while U.S.-China trade talks are set to resume after a phone call between Trump and Xi, with China granting rare earth licenses to U.S. automakers. CrowdStrike and Broadcom shares experienced profit-taking after reaching record highs ahead of earnings, despite solid results and positive outlooks, particularly for Broadcom's AI business.

Analysis

The U.S. equity market, reflected in the S&P 500's 1.5% weekly gain and 1% rise on Friday, reacted positively to a robust May employment report that eased recessionary fears and indicated manageable wage inflation, thereby sustaining market expectations for a future interest rate cut despite the Federal Reserve's stated data-dependent approach and Chairman Powell's resistance to political pressure for immediate easing. Geopolitical and corporate-specific events also influenced sentiment: a public dispute between President Trump and Elon Musk triggered significant volatility in Tesla (TSLA) shares, which declined over 14% on Thursday before a partial recovery, contributing to its over 25% year-to-date loss and highlighting risks associated with executive conduct and potential federal contract reviews. Concurrently, U.S.-China trade tensions showed signs of cautious optimism with talks scheduled to resume and China granting rare earth licenses to U.S. automakers, a notable development following previous tariff disagreements. In corporate earnings, both CrowdStrike (CRWD) and Broadcom (AVGO) experienced post-earnings profit-taking despite reporting strong underlying results; CRWD shares fell 5.8% after a mostly solid quarter, attributed to profit-taking from its record high near $489, mixed guidance, and ongoing federal inquiries, even as its price target was increased to $500. Similarly, Broadcom (AVGO) saw its stock retreat 5% from a record $261 despite a strong quarter and an optimistic outlook for its artificial intelligence segment, leading to a price target increase to $290, with the sell-off also largely viewed as profit-driven.

Key Decisions for Investors

• Investors should monitor Federal Reserve communications for alignment with market rate cut expectations and remain vigilant regarding U.S.-China trade developments, as both factors significantly influence market direction.
• Exercise caution with Tesla (TSLA) given its pronounced stock volatility, substantial year-to-date losses exceeding 25%, and the material risks associated with the ongoing dispute between its CEO and President Trump, which could affect government contracts.
• Evaluate Broadcom (AVGO) for potential accumulation, particularly on price dips following profit-taking, given its strong AI outlook and raised price target; similarly, assess CrowdStrike (CRWD) but weigh its solid performance and higher price target against mixed guidance and federal inquiries before adjusting positions.