MPC Markets Morning Call — 26 June 2026: Chip Rally Has Consequences for Hyperscalers
Wall Street whipsawed on Thursday as Micron’s blowout earnings collided with Apple’s aggressive price hikes, exposing the tension at the heart of the AI hardware boom. The S&P 500 finished flat while the Nasdaq slipped 0.5%, dragged by every Magnificent Seven name trading lower. PCE inflation matched expectations at 4.1% headline, but core readings at 3.4% remain well above the Fed’s target. ASX futures are pointing marginally higher, up 9 points to 8,755.
Micron’s stellar fourth-quarter forecast — underpinned by $22 billion in committed customer orders — sent its shares surging 15.7% and briefly pushed its market capitalisation past Meta and Tesla above $1.39 trillion. But the memory chip boom cut both ways: Apple raised MacBook and iPad prices to absorb soaring component costs, falling 6.1% and dragging the Mag Seven lower. The S&P 500 closed essentially flat at 7,354, the Dow eked out a 0.1% gain to a fresh intraday record at 51,921, while the Nasdaq Composite dropped 0.5% to 25,359. May core PCE came in at 0.3% month-on-month and 3.4% year-on-year — in line with consensus — and first-quarter GDP was revised up to 2.1% from 1.6%. Oil rebounded 2.6% after an attack on a cargo vessel in the Strait of Hormuz threatened to complicate the fragile US–Iran peace deal. ASX 200 futures are up 9 points at 8,755, with the Australian dollar steady at US$0.6910 after a stronger-than-expected May jobs print of 40,300.
The S&P 500 closed flat at 7,354, the Dow rose 0.1% to 51,921 (fresh intraday record), the Nasdaq fell 0.5% to 25,359, and the SOX chip index jumped 3.5%.
Micron surged 15.7% on blowout AI-driven guidance and $22 billion in locked-in customer commitments, briefly overtaking Meta and Tesla by market cap.
WTI crude rebounded 2.6% to $72.15 after an attack on a cargo ship in the Strait of Hormuz, while spot gold rose 0.8% to $4,030.
May core PCE held at 3.4% year-on-year and headline hit 4.1% — both well above the Fed’s 2% target — though the month-on-month print came in slightly soft, easing rate hike bets.
Apple fell 6.1% after raising Mac and iPad prices, Microsoft dropped 3.5% (now down 21% in June, its worst month ever), and private credit redemption pressure intensified at Ares and Apollo.
ASX 200 futures are up 9 points at 8,755, the Australian dollar is steady at US$0.6910 after 40,300 jobs were added in May, and Tokyo CPI and US Michigan sentiment are due today.
Equities — Micron’s Triumph, Apple’s Tax
Wall Street ended Thursday mixed in volatile trading as conflicting signals from the semiconductor supply chain whipsawed sentiment. The S&P 500 shed 0.1% to close at 7,354.42, having swung from as high as 0.8% to as low as 0.5% through the session. The Nasdaq Composite slipped 0.5% to 25,358.60, posting a four-day losing streak, while the Dow Jones Industrial Average bucked the trend, rising 0.1% to 51,920.93 after scaling a fresh intraday record high earlier in the session.
Micron Technology was the standout, surging nearly 16% after delivering blowout quarterly earnings and guidance that topped even the most bullish forecasts. The memory chipmaker pointed to robust demand from AI workloads and hyperscale data centres, and disclosed $22 billion in strategic customer agreements designed to signal that the current boom is more than ephemeral. The rally briefly pushed Micron’s market cap past $1.39 trillion — overtaking both Meta Platforms and briefly Tesla. The SOX chip index jumped 3.5%, and the Roundhill memory stocks ETF surged 10%. Qualcomm added almost 4% after projecting $15 billion in data centre sales by 2029 and unveiling Meta as its first Dragonfly CPU customer. South Korean memory names SK Hynix and Samsung Electronics rebounded sharply in Asian trade.
Countering the semiconductor euphoria was Apple, which fell 6.1% after raising prices on MacBooks, iPads, and home devices to offset soaring memory and storage costs. Microsoft dropped 3.5% — now down 21% in June, its worst calendar month on record. As Vital Knowledge’s Adam Crisafulli observed, Micron’s 81% operating margin is “probably especially galling to the rest of the industry clamouring for memory” — if the AI party is to continue, it cannot be the case that all the profit flows to a handful of chip suppliers while hyperscalers absorb the cost. Six S&P 500 sectors rose and five fell on the day, with industrials gaining 2% (Caterpillar +5.5%) and communication services losing 1%.
“We remain constructive and believe investors should stay invested, while keeping diversification at the centre of portfolio construction,” said Ulrike Hoffmann-Burchardi at UBS Chief Investment Office. “The past few months have shown how quickly narratives can shift, how costly excess cash can become when markets move higher, and how single-stock selection represents both an opportunity and a risk.”
Inflation, the Fed & the Fading Iran Shock
The May core PCE price index — widely regarded as the Fed’s preferred inflation gauge — rose 0.3% month-on-month and 3.4% year-on-year, in line with consensus and ticking up slightly from April’s 0.2% and 3.3% readings. Headline PCE increased 0.4% month-on-month and 4.1% year-on-year, the highest annual reading since October 2023. Both core and headline measures remain well above the Fed’s 2% target, and with CPI also above 4%, the two benchmark inflation gauges are now more than double that threshold.
The backdrop for monetary policy has shifted rapidly. The effective closure of the Strait of Hormuz following the US–Israeli assault on Iran in late February triggered the largest supply disruption in history and sent oil prices surging. That inflationary shock forced central banks globally to pivot hawkish. Last week, under new chair Kevin Warsh, the Fed signalled at least half of FOMC policymakers anticipated rate hikes this year. But the interim US–Iran peace deal signed earlier this month has reopened the strait — tanker crossings doubled to 70 on Wednesday alone — and oil prices have cratered back to pre-conflict levels. Wall Street broadly believes May’s PCE report marks the peak of the Iran-driven inflationary impulse.
Separately, first-quarter GDP was revised sharply higher to 2.1% annualised growth from the prior 1.6% estimate, and initial jobless claims fell to 215,000 against expectations of 225,000, signalling a still-resilient labour market. Traders removed roughly 15 basis points of implied Fed tightening by year-end in recent sessions, and the CME FedWatch tool showed a marginal easing in rate hike bets after the PCE release.
“Today’s inflation data confirms a worrying trend that emerged prior to the conflict in the Middle East — a floor was forming under service sector inflation that was keeping inflation hot and sticky. The conflict amplified the rise but was not the only reason for it. That is why the Fed started to debate rate hikes earlier in the year,” said Diane Swonk, chief economist at KPMG US. “We still expect two rate hikes by the Fed in the back half of the year.”
“The worst of inflation and consumer angst may be mostly behind us,” said Brian Jacobsen at Annex Wealth Management. “As long as gasoline prices trend lower, inflation expectations will likely follow suit.”
Energy, Commodities & FX
Oil prices rebounded after touching pre-war lows a day earlier. West Texas Intermediate rose 2.6% to $72.15 a barrel after the UK Maritime Trade Operations reported that a cargo vessel was struck by an unknown projectile in the Strait of Hormuz near Oman. The Wall Street Journal later confirmed the ship was a Singapore-flagged freighter attacked by Iran’s Islamic Revolutionary Guard Corps — a diplomatic setback following President Trump’s interim peace deal with Tehran last week. Despite the incident, tanker traffic has been improving through the strait, with Kpler data showing confirmed crossings doubling to 70 on Wednesday.
The broader commodity complex was mixed. Spot gold rose 0.8% to $4,029.56 an ounce, finding a bid as the dollar weakened and rate hike expectations eased marginally. Precious metals overall gained 1%. On a five-day basis, commodities remain deeply in the red: silver is down 11.9%, copper off 5%, crude down 6.7%, and uranium off 8%. Bitcoin fell 2.4% to $59,445, while Ether dropped 3.1% to $1,562.
The US dollar snapped a six-session winning streak, with the DXY index falling 0.2% to 101.43 as the in-line PCE data cooled rate hike expectations. The euro edged up 0.1% to $1.1374, sterling gained 0.3% to $1.3201, and the yen held flat at ¥161.78 per dollar. The 10-year Treasury yield was little changed at 4.39%, while the 2-year yield dipped 2 basis points to 4.13%. A 7-year auction was mixed — weak indirect demand but strong direct bids.
Private Credit Pressure & Corporate Movers
Private debt markets remain extremely choppy beneath the surface. Regulatory filings released Thursday showed investors in Ares Management’s $23 billion flagship private credit fund sought to withdraw 14.4% of shares in Q2, up from 11.6% in Q1, with redemptions again capped at 5%. Earlier this week, Apollo imposed a 5% cap on redemptions from its $26 billion private credit fund after investors sought to pull 17% of shares. WisdomTree’s private credit and alternative income ETF is retesting all-time lows. There has been little spillover into public markets so far, but sentiment in the space remains bleak.
A new Fed paper published this week put hedge fund exposure to US Treasuries back under the spotlight. Hedge funds now hold $4 trillion in Treasury exposure — 8.5% of the market — with repo cash borrowing to finance these positions at $3 trillion. Both bond holdings and repo borrowing doubled between 2023 and 2025. The systemic risk question persists, though for now, no stress has materialised.
Vital Knowledge’s Adam Crisafulli warned that while tech is enjoying a relief rally, “the memory mania has some dark sides, including pressuring the free cash flow at hyperscalers and driving inflation higher throughout the economy.” If memory suppliers capture all the profit, the AI boom risks becoming self-defeating for the broader tech ecosystem.
In corporate news, Qualcomm unveiled its Dragonfly C1000 data centre CPU with Meta as its first customer, targeting $15 billion in data centre sales by 2029, and announced a roughly $4 billion all-stock acquisition of AI startup Modular to challenge Nvidia’s CUDA lock-in. Microsoft announced a third price increase for Xbox consoles amid component shortages. Jefferies posted Q2 earnings that missed estimates. Darden Restaurants issued a cautious profit outlook as Olive Garden same-store sales trailed expectations. McCormick beat on Q2 profit, helped by higher prices and a tariff refund.
ASX Outlook & Day Ahead
Australian shares are set for a modestly higher open, with S&P/ASX 200 futures up 9 points or 0.1% to 8,755. The Australian dollar erased early losses to close 0.1% higher at US$0.6910 after data showed the economy added 40,300 jobs in May — the strongest increase in five months — though April employment was revised sharply lower. Capital Economics said the figures were unlikely to settle the debate over the RBA’s next move, though persistent underlying inflation continued to support the case for one final “insurance” rate hike.
Domestically, KMD Brands secured a NZ$208 million ($170 million) sustainability-linked debt facility extending funding through October 2028. Morningstar pushed back on the bank short trade, arguing the $11 billion in record short positions against the majors amounts to just 2% of the sector’s $620 billion market value and remains below median ASX 200 short interest. 4DMedical received TGA approval for its CT:VQ lung imaging software, clearing the way for commercial rollout across Australia.
The ASX is poised for a marginally positive open with futures up 9 points. The Australian dollar held at US$0.6910 following a solid May employment report. Watch for any further fallout from the Strait of Hormuz incident and how energy stocks react to the oil rebound.
- Japan Tokyo CPI (June) — Key inflation reading that could influence Bank of Japan policy expectations and yen direction.
- US University of Michigan Consumer Sentiment (June, final) — Final revision to the consumer confidence gauge; inflation expectations component closely watched after elevated May PCE.
- Minneapolis Fed President Neel Kashkari speaks — First Fedspeak since last week’s hawkish dot plot; markets will parse for guidance on whether hikes are imminent or conditional.
- Week Ahead: RBA Meeting Minutes (Monday 29 June) — Will provide detail on the Board’s debate around the rate decision and any shift in the inflation outlook.
- Week Ahead: US Non-Farm Payrolls (Thursday 3 July) — Brought forward one day due to Independence Day; consensus and labour market health critical for Fed hike timing.
