US MARKET CALL: June Swoon!

On Wednesday, June 3, we titled our QuickTakes "June Swoon?" As it turned out, the question mark should have been an exclamation mark. On Friday, June 5, stocks swooned unmistakably. The S&P 500 closed at 7,383.74, down 2.64%. The Nasdaq and S&P 500 equal-weight indexes fell 4.77% and 1.45%, respectively.

The catalyst was a stronger-than-expected payroll employment report that reinforced what we have been saying for weeks: The labor market is improving. Inflation remains a bigger risk than unemployment. That puts a federal funds rate (FFR) hike back on the table sooner rather than later, in our opinion. Add SpaceX's coming mega-IPO, which already may be pulling capital away from other stocks, and market volatility was bound to pick up. For now, we see the recent action as a rotation, not the start of a correction, though the June swoon may not be over yet.