Morning Bid: The chips are blue

• The SOX chip index fell 5% Tuesday after midday losses exceeded 8%; Asian markets declined and U.S. futures were negative Wednesday ahead of key inflation data
• May CPI report is expected to show headline inflation creeping higher for the first time in three years, with core inflation near 3%, influencing both stock sentiment and a 10-year Treasury auction
• U.S. petroleum exports hit a record $37 billion in April (up from $28 billion in March), with the petroleum trade surplus reaching a record $17.7 billion as the U.S. leads global oil production

Market Summary: Tech Selloff Intensifies Amid Inflation Concerns

Key Market Developments:

U.S. tech stocks experienced significant volatility Tuesday, with the SOX chip index falling 5% by close after dropping over 8% intraday. Asian markets declined and U.S. futures traded lower Wednesday ahead of critical inflation data.

Inflation and Central Bank Actions:

The May CPI report is expected to show headline inflation rising for the first time in three years, with core inflation holding near 3%. Federal Reserve rate hike expectations by year-end are now priced into futures markets. The ECB is anticipated to deliver a rate hike imminently, while Japanese wholesale price data suggests the Bank of Japan will follow next week.

Energy Markets:

Oil prices fell to a seven-week low Tuesday on reports of rising exports through the Strait of Hormuz, despite U.S.-Iran missile strikes overnight. However, crude prices remain elevated due to potential supply concerns and declining U.S. inventories. The broader selloff occurred independent of energy market movements, indicating deeper market nervousness.

Trade Data:

The U.S. trade deficit narrowed as petroleum exports surged to a record $37 billion from $28 billion in March. The U.S., now a net oil exporter, recorded a record petroleum trade surplus of $17.7 billion versus $9.4 billion previously.

Market Outlook:

The upcoming SpaceX IPO later this week may be contributing to market volatility as investors reposition portfolios. A 10-year Treasury auction is scheduled Wednesday following the CPI release, which will set the tone for both equity and bond markets.