US equity indices closed slightly lower yesterday. The S&P 500 fell 0.22%, the Nasdaq 100 dropped 0.66%, and the Dow Jones Industrial Average eased 0.03%.

The sell-off in the US semiconductor sector spilled over into South Korea, reviving concerns that the rapid rise in AI-related stocks this year has gone too far, too fast. South Korea's KOSPI plunged almost 7% before partially recovering. Shares of Samsung and SK Hynix lost more than 6%, while Japan's Kioxia tumbled 13% after a phenomenal rally. At the same time Brent fell to its lowest level since the start of the Middle East war.

Two specific headlines triggered the sell-off and dented the narrative of an endless shortage of computing capacity. First, there are reports that Meta plans to build a cloud infrastructure business to sell access to computing power and AI models. Second, sources said Apple is negotiating purchases of chips from two Chinese manufacturers, a development that could hit South Korean suppliers.

The oil market remains predictably bearish. Brent fell 1.3% to $70.63 per barrel, a low since February 27, as flows through the Strait of Hormuz increased. That supports the thesis that a restoration of Persian Gulf supplies is continuing to weigh on prices, eroding the last remnants of a wartime premium. Cheaper oil works to lower inflation, which directly affects central bank calculations.

Gold rose for a second day, trading above $4,060, after Federal Reserve head Kevin Warsh said yesterday that price risks have receded in recent weeks. Although Warsh reaffirmed the determination to return inflation to the 2% objective, his comments on easing inflationary expectations were read as a sign that the regulator is in no rush to hike in July. That weakened the dollar, which stabilized after two days of gains.

All eyes are now on the US employment report. Economists expect solid payroll gains in June, although unlikely to exceed May's result. Hiring is expected to be strongest in leisure and hospitality, helped by the World Cup, while public sector employment may show its fastest annual rise. That is the key fork in the road. If the report confirms labor market strength, bets on a September rate hike will firm, putting pressure back on gold and supporting the dollar. If the data disappoints, arguments for a pause will strengthen.

A technical picture for the S&P 500 suggests that the immediate task for buyers today is to clear resistance at $7,474. That will show strength and open the way to $7,494. Controlling $7,518 would further cement the bulls' position. On the downside, buyers must defend $7,451. A break there will quickly push the index back to $7,427 and open the road to $7,404.