The S&P 500 crossed 7,500 yesterday. Today it closed at 7,408. The Dow crossed 50,000 yesterday. Today it lost 537 points. The Nasdaq gave back 1.5%. Intel fell 6%. AMD fell 6%. Micron fell 7%. Nvidia fell 4%. The 10-year yield spiked to 4.55% — the highest in a year. Rate hike odds hit 45%. And Jerome Powell's term ended today. The AI rally that powered through two inflation reports and a trade summit ran out of room on the day it had to face all of it at once.

Ugly Friday. The S&P 500 fell 1.2% to close at 7,408 — back below 7,500, one day after crossing it for the first time. The Nasdaq dropped 1.5% to 26,225. The Dow gave back 537 points. The Russell 2000 lost more than 2%, its worst day since November. Ten of the eleven sectors finished in the red. Energy was the only one that went up.

The chips got hit hardest. Intel fell 6%. AMD lost 5.7%. Micron gave back 6.6%. Nvidia dropped 4.4%. Cerebras — which jumped 68% in its IPO debut yesterday — fell 10% on day two. Applied Materials beat on earnings, revenue, and guidance and still fell. When a company beats on every line and the stock goes down anyway, that tells you the selling isn't about the quarter. It's about the price the market already paid for it.

The 10-year Treasury yield spiked 9 basis points to 4.55% — the highest level in a year. A month ago, the chance of a Fed rate hike in 2026 was 1%. Today it's 45%. That's not a rounding error. That's the bond market telling you the inflation data from this week — CPI at 3.8%, PPI at 6% — is going to force the Fed's hand. And Jerome Powell's term as Fed chair ended today. Kevin Warsh takes over Monday. The market is walking into a new Fed regime with yields at a year high and hike odds at their highest since 2023.

Oil kept climbing — up about 2.6% — as the Trump-Xi summit ended with no Iran breakthrough. Trump's two days in Beijing produced a Hormuz statement and a Boeing order, but no path to ending the war. The market had hoped China would pressure Iran to reopen the Strait. Instead, the trip ended and the oil price went up. Gold fell 2.7%. Silver dropped 8%. Copper lost 4.2%. When metals fall while oil rises, it means the market is pricing inflation and recession risk at the same time.

Boeing fell 2.8% after investors realized the 200-jet order was smaller than the 500-plane, $77 billion deal many had expected. Dell hit a record high after Trump mentioned the company at the White House. The Empire State Manufacturing Index came in at 19.6 — triple the 6.2 estimate — showing the factory economy is running hotter than anyone thought.

Stocks don't price today. They price the next six to twelve months. And what the market priced today is that the AI rally just hit the wall that every rally eventually hits: the cost of money.

Here's the chain. For three weeks, the market powered higher on AI earnings. AMD blew out margins. Cisco raised its AI order book to $9 billion. Cerebras debuted at +68%. The Nasdaq gained 10% in two weeks. The thesis was: AI earnings are so strong they can overcome any macro headwind — inflation, oil, yields, the war. And for a while, they did. The S&P hit a record yesterday with PPI at 6% and the 30-year above 5%.

Today the headwinds won. The 10-year hit 4.55%. Hike odds jumped to 45%. Applied Materials beat and still fell. The whole chip complex dropped 5% to 7% in a single session. When the cost of borrowing money rises to a year high, it changes how much the market is willing to pay for future earnings — even good future earnings. A company growing 30% a year is worth less when you discount those earnings at 4.55% than when you discount them at 4%. That's math, not opinion. And today the math caught up to the momentum.

I saw this setup in September 2018. The S&P hit a record on September 20th of that year. The 10-year yield crossed 3.2% — the highest in seven years at that time. The earnings were strong. Tech was leading. And then the market sold off 20% over the next three months because higher yields finally overwhelmed the earnings story. I'm not calling a 20% drop. But the pattern is identical: record highs, rising yields, strong earnings, and a moment when the yield reaches the level where the math no longer works. In 2018, that level was 3.2%. In 2026, we're finding out if it's 4.55%.

The forward-looking read: Nvidia reports Wednesday after the close. That's four trading days away. After today's selloff, Nvidia's report becomes the single most important print of the year. If Nvidia posts data center revenue above $70 billion with margins holding above 70%, the AI story survives even at 4.55% on the 10-year. If it misses — or if guidance disappoints — the selloff from today extends, because there's no other name big enough to hold the index up. Kevin Warsh chairs his first Fed meeting June 17-18. The market goes into that meeting with 45% hike odds and a new chair who has publicly questioned the pace of the Fed's balance sheet reduction. His first words as chair will move the tape more than any data release between now and then.

Three things I'm watching over the weekend and next week:

The print that decides whether the AI trade holds or breaks. The Street expects revenue between $70 billion and $78 billion, roughly 60% growth. After today's 4.4% drop, the stock goes into earnings with a lower bar than it had yesterday morning. Watch data center gross margin — if it holds above 70%, the earnings quality story from two weeks ago survives. If margins compress, the whole chip complex goes back to where it was before AMD's blowout on May 6. Today's selloff in Applied Materials — beating and still falling — is the warning sign for Nvidia bears.

Powell's term ended today. Warsh starts Monday. Elizabeth Warren already called him "Trump's sock puppet." The market is pricing 45% odds of a rate hike this year — up from 1% a month ago. Warsh's first public remarks will set the tone. If he signals patience, yields ease and the tech selloff stabilizes. If he signals concern about inflation, 4.55% on the 10-year becomes the floor, not the ceiling.

The Trump-Xi summit ended without an Iran deal. Oil climbed 2.6% today. The question over the weekend is whether China follows through on Bessent's hope that Beijing will pressure Iran behind the scenes, or whether the Strait stays shut and oil pushes toward $110 next week. If oil breaks $110, the inflation math gets worse, hike odds go higher, and the AI rally's fight against the cost of money gets harder.

Yesterday the market crossed two milestones. Today it gave both back. Yields at a year high and hike odds at 45% just told the AI rally it has to earn its records all over again. Nvidia on Wednesday decides whether it can.

That's it for today. Have a good weekend. I'll be back on Monday after the close.