Wall Street woke up Monday to a session where the bond market is calling the shots. A stronger-than-expected jobs report and sticky inflation worries pushed Treasury yields higher, forcing investors to rethink expectations for Federal Reserve rate cuts. Yet across a CNBC segment featuring two strategists with very different lenses, their verdict on one corner of the market was unanimous: semiconductors remain the trade to own.
The Bond Market Is in the Driver’s Seat
Craig Johnson, Chief Market Technician at Piper Sandler, framed the regime shift bluntly. “The equity market is going to take its cue from the bond market. We did see this bear flattener where the short-term part of the curve moved up pretty quickly, and historically it has suggested we could have a more volatile period,” he said.
The data backs the framing. The 2-year Treasury yield sits at 4.05%, near the 96th percentile of its trailing 12-month range, while the 10-year yield is 4.47%. The 10Y-2Y spread has compressed to 0.38%, the lowest level in the past year and down from 0.74% on February 9, 2026. Fed funds futures have shifted to pricing one rate hike in 2026, up from 50/50 odds just days earlier, even as the Fed funds target upper bound has held at 3.75% since December 11, 2025.
The technical damage showed up across the market. The S&P 500 and Nasdaq broke through their 20-period moving averages on Friday, and the VIX jumped from 15.40 on June 4 to 21.51 on June 5, a 39.7% single-day spike that took the fear gauge into the elevated band.
The Complacency Hasn’t Fully Cleared
James Cakmak, Chief Investment Officer at Clockwise Capital, argued the repricing has further to run. “Complacency is largely still there. A lot of the fiscal issues, the macro forces at play, whether it be rising bond yields, the rising Japanese yen, or private credit markets, I don’t think are fully baked in,” he said.
That list of underpriced risks matters because broad equity benchmarks remain near highs. The 10Y-2Y spread from FRED shows the curve flattening fast, yet SPDR S&P 500 ETF (NYSEARCA:SPY) is still up 8.16% year-to-date through June 5.
The Semiconductor Trade Remains Intact
This is where both strategists saw eye to eye. Cakmak delivered the segment’s centerpiece: “I bifurcate technology into two buckets: semiconductors and everything else. The semi trade is still very much intact, and I don’t really see much risk on the semi side.”
The numbers explain the conviction. The VanEck Semiconductor ETF (NASDAQ:SMH) is up 58.19% year-to-date and 127.39% over the past year through June 5, dwarfing the broader tech sector. The Technology Select Sector SPDR Fund (NYSEARCA:XLK), by comparison, is up 25.39% year-to-date.
Semis sit at the foundational layer of the AI buildout, with order books and capex commitments from hyperscalers providing demand visibility that rate-sensitive software names and consumer-facing tech lack. As rotation pressure hits the rest of the complex, the chip cohort is where both strategists are comfortable hiding.
The One Caution: Semiconductors Have Gone Parabolic
Johnson tempered the bullishness with a technician’s warning. “Semiconductor charts have been absolutely parabolic. The only other time we’ve seen a rate of change this high was in the ’99-2000 period. There is some scope where you could see some further backing and filling here, which in the short term could be rather painful,” he said.
He was careful to separate trend from trade. “We did see some uptrend violations happen on the S&P, the Nasdaq, and other indices, and it’s going to take some time to repair that. The longer-term bull market isn’t per se over, but this is definitely a trend we need to watch,” Johnson said.
The takeaway for investors is that the bond market is now setting the tone, volatility has returned, and the broader market is in a repair phase. Semiconductors remain the one area both strategists favor, though the sector’s rapid gains leave room for a bumpier ride even within one of the market’s strongest groups.
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