Chipflation, which is chip inflation, is starting to spread.

1. The May PCE rebounded above 4%, but the single-month data did not significantly exceed expectations, and bonds breathed a sigh of relief first. The 10-year U.S. Treasury yield fell back to around 4.38%, the U.S. dollar index edged lower, and the VIX remained below 20, not yet at panic selling levels.

2. Micron surged after its earnings report, with AI memory demand continuing to be the strongest trading theme across the board.

3. However, Apple, due to a sharp increase in memory and storage chip costs, raised prices on a range of products by around 20%. The shortage of AI chips is shifting from profit expansion upstream to margin and sales pressure for downstream hardware manufacturers.

4. Apple products rose in price, but Apple's stock price plunged 6.1%. This not only prevented the positive AI storage news from spreading across the entire tech sector, but the Mag 7 continued to drag down the index. The divergence lies in the fact that upstream suppliers with tight supply like Micron are being bought, while terminal giants under cost pressure like Apple are being sold.

5. The final Q1 GDP reading for the U.S. was revised up to 2.1%, but consumer spending was significantly revised downward. On the surface, growth appears stronger, but internal demand is not balanced. The market's interpretation leans toward stagflation—meaning the economy is not weak enough to support rate cuts, yet consumption is already showing strain.

6. Initial jobless claims fell to 215k, below the expected 225k. Continuing claims rose to 215k. Layoffs are not numerous, but the pace of re-employment may be slowing.

7. New York Fed President Williams continued to emphasize that inflation is still too high. He expects inflation to remain around 3.5% by year-end, and the return to 2% may be delayed until 2028.

8. After the U.S. stock market closed and into the Asian trading session, risk appetite continued to weaken. South Korea, Japan, Hong Kong, and A-shares all had a terrible day today, with South Korea's KOSPI experiencing another limit-down day.

9. Apple's Asian suppliers fell in line with Apple's decline in U.S. stocks, as the market worries that high storage costs will compress profits for terminal manufacturers of phones, PCs, and tablets, and lead to a new round of price increases.

10. Chipflation, which is chip inflation, is starting to spread. $DRAM