Stocks closed lower yesterday with all of the major indexes in the red. The Russell 2000 gave up -1.31%, followed by the Dow with -1.21%. The S&P 500 and Nasdaq were off -0.89% and -0.74% respectively.

It also ends the S&P's 9-day winning streak. For context, it's still up 2.72% over the last 10 trading days, including yesterday's retreat. And YTD, it's up 10.4%. (For further context, the Nasdaq is up 15.5%, the Russell is up 16.6%, and the mid-cap S&P 400 is up 13.5%.)

Plenty of AI-related names continued their climb yesterday with Sandisk up 6.71% (and making a new all-time high in the process); Micron up 1.45% (new all-time high); and Marvell up 3.73% (new all-time high), to name a few.

But we saw some backsliders as well with NVIDIA off -3.62%; Nebius off -3.42%; and Broadcom off -0.49%. Same goes for Palo Alto Networks following Tuesday afternoon's earnings. Despite posting positive top and bottom line surprises, positive growth rates, and raising guidance, not to mention soaring as much as 14% in after-hours trade immediately after reporting, they ended up falling -5.64% yesterday.

After the close yesterday we heard from Broadcom, which reported a positive EPS surprise of 1.67%, and a positive sales surprise of 0.68%. That translated to a quarterly EPS growth rate of 54.4% vs. this time last year, and a sales growth of 47.9%. CEO Hock Tan said demand for AI semiconductors remains "simply insatiable." And they raised Q3 revenue guidance 7.3% above expectations. As mentioned above, they were off -0.49% in the regular session before earnings, but fell another -14% in after-hours trade following earnings. YTD, they are up 38.5%.

In other news yesterday, MBA Mortgage Applications were off -2.5% w/w, with purchases down -2.9%, and refi's down -2.3%.

The PMI Composite report showed the Composite Index at 51.5, slightly under last month's 51.7, and views for 51.7. The Services Index was at 50.7, also just under last month's 50.9, and estimates for 50.9.

The ISM Services Index, however, was up at 54.5 vs. last month's 53.6, and the consensus fort 53.7.

Factory Orders rose 4.8% m/m vs. last month's upwardly revised 1.8% (from 1.5%), and forecast for 4.3%.

And the ADP Employment Report showed private payrolls grew by 122,000 in May, beating April's 105,000, and outlook for 120,000.

But the labor report everybody is really waiting for is Friday's always important Employment Situation report from the Bureau of Labor Statistics (BLS). The consensus is calling for a headline number of 85,000 new jobs being created in May (90K in the private sector, and -5K in the public sector). If the ADP number is accurate, we could see a positive surprise on Friday. Granted, the ADP report does have a spotty track record of forecasting what the BLS report will say. Nonetheless, ADP showed a nice increase and a beat. We'll see if that translates to the BLS.

In the meantime, today we'll get the Productivity and Costs report, Weekly Jobless Claims, and the Challenger Job-Cut Report.

And we'll see if the markets can regroup after yesterday's dip, and begin a new winning streak.

See you tomorrow,