Red Hot SOX
Rally in semiconductor share prices warns of faster semiconductor price inflation …
No, I’m not referring to the either the Red or White Sox. Instead, I’m citing the PHLX semiconductor stock price index, whose ticker symbol is SOX.
Thus far in 2026, the SOX has advanced by 66.2%. Moreover, according to its May 8, 2026 close, the SOX soared higher by 163.6% from a year earlier. The semiconductor boom also explains 2026-to-date’s mega-advances recorded by the equity markets of Korea (up 77.9%) and Taiwan (up 43.6%).
Helping to drive SOX higher is semiconductor price inflation, which will make itself known in the prices of consumer electronics that are semiconductor intensive. Inflation will continue to gain inflation as long as the Strait of Hormuz is blocked. Helium is an important input to the production of semiconductors and much helium is shipped through the Strait of Hormuz.
Among the stalwarts of semiconductor stocks is the 161.7% 2026-to-date lift-off by Micron’s share price. Compared to a year earlier, Micron is up by an incomprehensible 777.1%. Just for May 8, 2026 alone, Micron’s stock soared higher by 15.5% from May 7’s close.
Market value of Washington’s Intel stake soars higher by 510.3% in less than nine months …
Also, the US government’s investment in Intel has paid off handsomely. Back on August 22, 2025, the US government agreed to pay $20.47 per share for 433.3 million shares of Intel, which equated to a 9.9% ownership share of the company. As of May 8, 2026’s close, Intel’s stock had advanced to $124.92. The latter was up by 510.3% from the $20.47 per share price paid by the US government. The market value of the 433.3 million shares purchased by the US government back in late August 2025 has swelled from $8.9 billion to $54.1 billion.
SOX races past 2026-to-date gains of 8.1% for S&P 500 and 12.9% for NASDAQ …
SOX’s year to date surge was far ahead of the comparably measured gains of 8.1% for the S&P 500, 12.9% for the NASDAQ composite, 15.6% for the S&P 500’s information technology index, and 12.0% for the S&P 500’s communications index (the latter includes Alphabet (aka Google), Netflix, and Meta).
The biggest challenger to SOX was 2026-to-date’s 37.4% surge by the PHLX’s oil service stock price index (OSX).
Nevertheless, the SOX will not be immune from jarring corrections. Outsized advances of 66% in less than five months will increase the risk of at least temporary setbacks whenever an unfavorable story inevitably pops up.
April’s jobs report was nice and far from strong …
April’s payrolls grew by 115,000 jobs as private sector payrolls increased by 123,000 jobs. However, after excluding the addition of 53,900 health care and social assistance jobs, the monthly additions to nonfarm payrolls fell to 61,100 jobs overall and 69,100 jobs for the private sector.
That being said both the size and distribution of jobs growth have improved considerably from 2025’s yearlong pace. The average monthly increase by 2025’s nonfarm payrolls was 10,000 jobs, wherein government payrolls shrank by -24,000 jobs per month and private sector payrolls rose by 25,000 jobs per month.
However, 2025’s addition of 25,000 jobs per month to private sector payrolls was more than accounted for by the addition 57,000 healthcare and social assistance jobs per month. Thus, private sector jobs excluding healthcare and social assistance contracted by -33,000 jobs per month.
Jobs creation has improved considerably through the first four months of 2026. For starters, the average monthly increase to payrolls rose from 2025’s 10,000 jobs to the 76,000 of January-April 2026, wherein the average monthly increase for the number of private sector jobs jumped up from 2025’s 25,000 to the 86,000 of 2026 to date. Still, healthcare and social assistance accounted for a disproportionately large 64.1% of new private sector jobs given how healthcare and social assistance supplied a much smaller 17.5% of outstanding private sector jobs.
Some of the noteworthy improvements in private sector jobs creation comparing the monthly averages of yearlong 2025 with 2026-to-date are (i) nonresidential construction (from +5,000 to +14,000), (ii) manufacturing (from -9,000 to +4,000),(iii) professional, scientific & technical services (from -2,000 to +9,000), (iv) retail (from -4,000 to +13,000), and (v) temps (from -8,000 to +8,000).
The most notable deteriorations in average monthly change for private-sector payrolls from 2025 to 2026-to-date applied to information (a deepening of 2025’s average monthly loss of -4,000 jobs to -17,000) and finance (down from +1,000 to -17,000).
I hold that tariffs and de-globalization have been a net drag on jobs creation. Nevertheless, unfair trade practices were begging for remedies, while the US could no longer afford to neglect national security issues. Trump’s goals are laudable, but the administration’s methods are questionable.
Wage growth now favors return to 2% core inflation …
The deceleration of wage growth improves the long-term outlook for inflation. Despite the pickup in jobs creation and a still historically low unemployment rate of 4.3%, the average annual rate of hourly wage inflation dropped from yearlong 2025’s 4.0% to the 3.6% of 2026-to-date. If the annual growth rate for average hourly earnings does not rise much above 3.5%, a recurring 2% annual rate of core consumer price index inflation is attainable.
Faster growth by hours of work favors a rise by economic growth from 2025 to 2026 …
The index for total hours of work in the private sector rose by 0.6% year-over-year during January-April 2026. By contrast, the same index managed to rise by only 0.2% annually for calendar year 2025. By itself, the now faster growth for hours of work supports expectations of a rise by the annual rate of real GDP growth from 2025’s 2.1% to 2.3% for 2026.