The Federal Reserve raised the federal funds target range by 25 basis points to 3.75%-4.00% on Wednesday, its first increase since July 2023, and the bond market answered by buying duration. The 10-year Treasury yield fell about 5 basis points to roughly 4.95%, one session after touching 5.04%, its highest level since 2007. In the first stretch after the statement the Nasdaq Composite traded up about 0.8%, the S&P 500 about 0.3%, and the Dow sat just under flat. A rate hike pulled the long end lower. That reaction is the story.

JPMorgan’s trading desk put out its scenario grid for Wednesday’s July consumer price index, and the number that matters is not the base case. It is 0.25%, because that is where the sign of the expected S&P 500 move changes, and consensus sits five basis points below it.

The grid runs five buckets on core month-over-month. Above 0.30%, assigned a 5% probability, the desk sees the index down 1.5% to 2.5%. Between 0.25% and 0.30%, at 25% probability, down 0.5% to 1.25%. Between 0.20% and 0.25%, the modal outcome at 40%, up 0.25% to 0.75%. Between 0.15% and 0.20%, at 25%, up 0.5% to 1%. Below 0.15%, at 5%, up 1% to 2%. Economists polled by Dow Jones expect headline CPI to rise 0.1% on the month, taking the twelve-month rate to 3.4%, with core up 0.2% and 2.5% year over year.

The June employment report landed well short of expectations. The Bureau of Labor Statistics reported nonfarm payrolls rose by just 57,000 in June, against a Dow Jones consensus of 115,000 and a range of Wall Street estimates that ran as high as 180,000 from more bullish shops like RSM. The unemployment rate fell to 4.2 percent from 4.3 percent, a move that would ordinarily read as a positive but instead is consistent with people leaving the labor force rather than a genuine acceleration in hiring.

Private employers added just 98,000 jobs in June, according to the ADP National Employment Report released Wednesday, missing the Dow Jones consensus of 110,000 and down sharply from May’s unrevised 122,000. The miss lands one day ahead of the Bureau of Labor Statistics’ more closely watched nonfarm payrolls count for June, due Thursday.

The headline number undersells the composition problem

Nearly all of June’s job growth came from services, and within services, one sector did the heavy lifting: education and health services alone accounted for 48,000 of the 98,000 total, roughly half. Trade, transportation and utilities added 15,000, financial activities 14,000, and other services 8,000. Goods-producing industries barely registered — manufacturing added 5,000, construction just 2,000 — while natural resources and mining was the only sector to shed jobs, down 5,000. Leisure and hospitality, often read as a proxy for consumer demand, added only 2,000 positions.

The May PCE report lands Thursday, and a week ago it would have been a non-event. The market’s working assumption was that the Fed would look through an energy-driven inflation spike caused by the Strait of Hormuz disruption, treat it as a supply shock, and keep its eyes on the back half of the year. That assumption is gone. Kevin Warsh took it apart at his first FOMC meeting on June 17, and the print now arrives into a reaction function that has been quietly rewired.

The May Consumer Price Index lands Wednesday, June 10, at 8:30 a.m. Eastern, and the only number that matters is the gap to consensus, not the level. That distinction is the whole trade. April printed 3.8 percent headline and 2.8 percent core year over year, an acceleration from March’s 3.3 percent, and the market enters the print already braced for more — prediction markets are pricing roughly a 60 percent chance that May headline clears 4.2 percent, and the University of Michigan’s consumer survey shows inflation expectations near 4.8 percent. When the bar is set that high, a hot number is partly discounted and a soft one carries the larger surprise. The setup is asymmetric, and not in the bulls’ favor.

The chip complex did not drift lower on Friday. It broke on a macro catalyst, and that distinction governs everything about the week ahead. The Philadelphia Semiconductor Index closed at 12,220.7, down 1,396.73 points, a 10.26 percent single-day collapse. A retracement back to the prior highs inside five sessions requires the catalyst itself to be unwound, and the catalyst was a jobs report that cannot be un-printed before the next data drop. The base case is stabilization and a partial bounce, not a clean rip to fresh records.

The Fed’s preferred inflation gauge confirmed on May 28 what the trend has been saying for months: core PCE rose to 3.3% year-over-year in April, up from 3.2% in March, up from 3.0% in February. No shock, no surprise — just another step in the wrong direction. For quantum computing stocks, which are speculative, unprofitable, and priced entirely on long-dated future cash flows, this is not a neutral data point. It is another brick in the wall bearing down on their valuations.