Strong Jobs, Weak Markets, and the AI Selloff
Hope you had a great weekend!
Last week gave us one of those “good news is bad news” market moments.
Canada’s job market came in much stronger than expected, business activity picked up, and the economy looked more resilient than many expected.
But markets still sold off hard on Friday…
Because strong jobs can make central banks less likely to cut rates, and at the same time, the AI trade got hit hard after Broadcom’s update made investors question whether chip stocks had run too far, too fast.
Here is your Finance Femster breakdown of the week that was: 👇
📈 Market Pulse: TSX Pulls Back From Record Highs
🇨🇦 TSX Composite (34,413.45 | -1.0% for the week): Canada’s main index ended Friday at 34,413.45, falling 2.3% on the day and finishing the week down 1.0%.
That Friday drop was the TSX’s biggest daily decline in nearly four months. And the frustrating part is that the TSX had just hit a record closing high earlier in the week before pulling back as commodity prices fell and investors started pricing in a tougher rate environment.
The biggest drags were:
Materials were down 8.3% on Friday as gold and copperfell
Energy was down 4.1% as oil slipped to $90.57/barrel
Technology down 4.4%
💵 The Loonie: The Canadian dollar also slipped about 0.9% for the week, trading near $0.7184 USD. A stronger U.S. dollar and weaker oil weighed on it.
What this means:
Canada’s market is heavily tied to resources. So when gold, copper, oil, and energy stocks drop at the same time, the TSX feels it fast.
🇺🇸 U.S. Markets: AI Gets a Reality Check
U.S. markets also sold off hard on Friday.
The S&P 500 fell 2.6%, wiping out roughly $1.8 trillion in market value, while the Nasdaq dropped 4.2%. The damage was especially heavy in semiconductors, where U.S.-traded chip stocks lost about $1.3 trillion in value, and the PHLX Semiconductor Index fell more than 10% (its worst one-day drop since March 2020).
The selloff had two main triggers:
First, Broadcom shook confidence in the AI trade after its AI chip forecast came in below investor expectations. That raised concerns that some AI stocks had run too far, too fast.
Then Friday’s stronger-than-expected U.S. jobs report made things worse. Strong jobs pushed investors to worry that the Federal Reserve may keep rates higher for longer, or even lean more hawkish later in the year. Higher rates can pressure growth stocks because investors become less willing to pay high prices for future profits.
Some of the biggest AI names got hit hard:
Nvidia: down about 6%, wiping out more than $300B in market value
Micron: down about 13%
AMD: down about 11%
Broadcom: down about 8% Friday, after already falling sharply on Thursday
What this means: Broadcom was the spark. The jobs report poured fuel on the fire.
The AI story is still powerful, but expectations are extremely high. When a sector has already rallied hard, even “good” news may not be enough.
Simple takeaway: AI stocks may still be long-term leaders, but Friday reminded investors that valuation matters, especially when interest rate fears come back.
Big question now: Has the AI rally gotten ahead of itself?
💼 Canada’s Jobs Report: The Big Surprise
The biggest Canadian data point of the week was the May jobs report.
Canada added 87,800 jobs in May, crushing expectations for only 10,000jobs. The unemployment rate fell to 6.6%, down from 6.9% in April.
That is a big move.
And the quality of the jobs was mostly strong too:
Full-time jobs: up 154,000
Part-time jobs: down 66,200
Youth unemployment: fell to 13.4%
This is important because earlier this year, Canada’s job market had been looking weaker. May’s report helped recover a large portion of the job losses from previous months.
What this means: The jobs report made Canada’s economy look more resilient.
That is good news for workers and households.
But for markets, it complicates the interest rate story.
If the economy is holding up better than expected, the Bank of Canada has less reason to rush into rate cuts.
📊 Business Activity Also Picked Up
It wasn’t just the jobs report.
Canada’s Ivey PMI rose to 58.2 in May, its highest level since September.
A PMI reading above 50 means business activity is expanding.
That suggests the economy still has some momentum.
But there was a catch: price pressures are still showing up, which means inflation risk has not fully disappeared.
Simple takeaway: Canada’s economy looked stronger last week, but stronger data can make rate cuts less likely in the near term.
That’s why markets got nervous.
🏦 Bank of Canada: All Eyes on June 10
The Bank of Canada’s next rate decision is on June 10, and this jobs report makes the decision even more interesting.
Most economists still expect the BoC to hold its key rate at 2.25%.
But strong jobs, better business activity, and lingering inflation risks make it harder for the Bank to sound too dovish.
In simple terms: If the economy was clearly weak, rate cuts would be easier to justify. But if jobs are strong and price pressure is still hanging around, the BoC may choose to wait.
What this means for your money:
A longer rate pause can affect:
Mortgage renewals
Lines of credit
Savings account rates
Business borrowing costs
Stock market valuations
This is why the BoC’s wording matters almost as much as the decision itself.
📝 Final Thought: Good Economy, Nervous Market
Last week showed us a classic market lesson:
Good economic news does not always mean stocks go up.
Canada’s jobs report was strong. Business activity improved. The unemployment rate fell. But markets sold off because investors started asking a different question:
Does this mean rates stay higher for longer?
At the same time, the AI trade got a reality check. Broadcom’s update reminded investors that even strong companies can fall if expectations are too high.
That is the tension right now.
A stronger economy is good for workers, wages, and confidence. But if it keeps inflation pressure alive, central banks may stay cautious.
And a strong AI story is exciting, but if valuations get stretched, the market can punish even small disappointments.
So this is not a simple “good news” or “bad news” market.
It is a market trying to figure out what strong data means for interest rates, and whether AI stocks have run too far, too fast.
For everyday Canadians, the message is simple:
Watch the data. Stay diversified. Don’t let one rough market day shake your long-term plan.
Markets move fast, but your money plan should move with purpose.
And that starts with knowing your numbers.
If you’ve been meaning to get more organized with your spending, savings, debt, or financial goals, my Budget Planner is built to help you do exactly that.
It gives you a simple way to track your money, plan ahead, and make clearer decisions, even when the market feels noisy.
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Stay calm, stay diversified, and keep compounding.
Cheers 💫
Your Wealth Coach,
Finance Femster