Expansion is intact and hiring is reaccelerating, but a chip-led market rout and a yield spike show investors now treat strong data as a rate-hike risk — even as a record IPO wave led by SpaceX and Anthropic prepares to hit public markets.

Markets had their worst day in over a year on Friday: the Nasdaq fell about 4% — its biggest drop since April 2025 — the S&P 500 lost 2.6% to roughly 7,384, and close to $1 trillion in value evaporated, led by a violent slide in chip stocks after Broadcom declined to raise its AI-chip outlook.

The macro trigger underneath was the May jobs report: payrolls rose about +172,000 against expectations near 80,000 with unemployment steady at 4.3%, and rather than cheer the strength, investors marked up the odds of a Fed rate hike later this year, pushing Treasury yields higher (10-year near 4.55%, 2-year near 4.17%, the highest since early 2025).

That tape sits on top of the models' core read: a growth regime of expansion at 69% confidence with the market state still in bull, but with inflation as the primary tension — roughly a 50% probability of an inflation shock, driven in the real world by energy as the Iran conflict lifts oil and gasoline. Wednesday's May CPI is the week's hinge.

The bigger structural story is supply: a record run of IPOs is lining up. SpaceX is expected to list as soon as June 12 in what could be the largest IPO ever (around $75 billion raised at a $1 trillion-plus valuation), and Anthropic confidentially filed last week for a listing as soon as October. Together with OpenAI, the 2026 pipeline could pull north of $200 billion from public markets — more than all US listings combined since 2022.

For the regime itself, recession risk stays very low — about 1.3% over six months — and expansion persistence is high at 86% on a 12-month horizon, though near-term transition risk is more elevated (about a 61% chance of still being in expansion at three months), consistent with how jumpy the tape has been this week.