Past the Point of No Return: The Economic Collapse Is Happening!

While the Dow soared a huge 900 points to another all-time high, it didn’t do it for the usual reason. Money actually fled tech and moved into bank stocks and other more mundane or maybe safer investments. This looks like the start of a rotation, which happened orderly, but rotations sometimes indicate people fleeing the longtime market leaders, and that can quickly go disorderly once momentum builds.

To give you a sense of the rockslide, one chipmaker—Broadcom—caved in more than 12% on a revenue miss. Micron Technology tumbled more than 8%. Semiconductor names slid broadly. These were big moves.

“After an astonishing earnings season, the AI trade is still alive and well, but this rally is getting tired after an incredible more than two-month surge,” said Dennis Follmer, chief investment officer at Montis Financial….

Thursday’s moves “suggest the early innings of a rotation and it’s also a reminder that not all AI stocks are the same and there are different expectations built into each stock,” he added.

And that was exactly how the dot-com bust began. First, people thought tech couldn’t fall, but then the many companies that had bad earnings reports took some big dives. Eventually many of those got wiped out entirely. Then everything started to slide over the course of more than a year—almost two years. Even those that survived took years to recover from the massive rotation that picked up steam as investors woke up to realize they could not keep rewarding earnings non-performance forever.

Even though not all tech stocks were equal in that some companies really did have what it took back then to become the new business paradigm that would dominate industry for decades, those that had what it took to become the new species of business after the major extinction event, took almost a decade just to recover to where they had been before the fall.

As an example or troubles on this tremulous June day, Kevin O’Leary, heading up one of the biggest AI projects on Earth, announced he’s going to significantly scale back his massive Utah data center, reported on in this past weekend’s Deeper Dive, to try to ease the potentially disorderly public backlash over these monstrosities. So, there were several signs of major collapse, ranging from merely shifting ground, to roaring rockslides, all among the crème de la crème of Big Tech.

The big catalyst for the recent tech slide was the Iran War, which as I reported has spent this week slowly building up renewed momentum:

This comes after a losing day on Wall Street, with stocks pressured by rising tensions in the Middle East. Attacks escalated between the U.S. and Iran. Iran struck Kuwait International Airport early Wednesday, while a day earlier U.S. Central Command said it had defeated multiple Iranian ballistic missiles and drones, and carried out “self-defense strikes” on Qeshm Island in the Persian Gulf. It said that this was in response to “attempted attacks” by Tehran.

So, we went from a large losing day for stocks, to a major rotation day with some tech stocks taking big losses, even though the market overall shot up. Yet, there were some even bigger losers outside of tech where poor earnings were not forgiven. Calvin Klein’s owner, PVY, experienced its biggest plunge since the flash crash of 1987. The company got decapitated, losing almost a third of its value in one day. Again, the Iran war was tagged as being a significant contributor to that company’s stock crash:

Analysts were spooked by sustained pressure across the Europe, Middle East, and Africa region, where the prolonged U.S.-Iran conflict and softer consumer demand are now weighing on its revenue outlook….

PVH reaffirmed its full-year adjusted EPS guidance, which fell short of the Bloomberg Consensus estimate, and cut its revenue outlook amid a deteriorating macroeconomic environment….

Guggenheim analyst Simeon Siegel wrote in a note that while PVH reiterated full-year earnings, it “suggested that pressures from the prolonged conflict in the Middle East and related macroeconomic pressures were negatively impacting the full-year revenue outlook.”

Some of those other “macroeconomic pressures” might likely be the Trump Tariffs.

Loosening labor

So far this year, the labor market has been incredibly resilient against any kind of turnover; however, jobless claims also took a nasty leap. Again, the damage concentrated intensely in tech companies, which announced the most cuts in two years, as they ramped up spending on AI.

In May, Artificial Intelligence (AI) led all reasons for job cuts for the third month in a row, with 38,579 announced cuts.

It is the highest monthly total ever recorded for the reason since Challenger began tracking it in 2023, and it accounted for 40% of all cuts announced in May - up from just 7% in January, 25% in March, and 26% in April.

For the year, AI has been cited in 87,714 cuts, or 22% of all 2026 layoffs, already far surpassing the 54,836 attributed to the reason in all of 2025.

“The labor market is being reshaped by technology in real time,” said Andy Challenger, the company’s chief revenue officer.

“AI is now the leading reason companies give for cutting jobs.”

Longterm unemployment is also surging. It has reached the highest level it has seen since the massive Covid layoffs when multitudes failed to ever return to work.

On a macro level, the growing number of Americans in this boat raises red flags about the strength of the labor market and overall economy….

“It tells us a lot about economic health,” said Cory Stahle, an economist at job site Indeed.

Credit collapse

As stocks and labor roll over while corporate earnings fade, another crisis has been building in the private credit market, which broke off another large section with major player Blackstone restricting withdrawals from its flagship fund in an effort to slow the outflow of investors fleeing the fund.

It comes a day after private markets giants sold off after Switzerland’s Partners Group said it was curbing redemption requests in one of its European private equity vehicles….

Partners Group said on Thursday it was prepared to restrict withdrawals in more of its funds, warning that the spike in client withdrawals is now spreading from private credit into private equity.

Breakout emergency measures and rotations like this in stocks are how major crashes often get started. A big piece starts to slip here, then another over there, and then the whole mountainside starts to move.

Big Oil makes the slope slippery

The down pressure on major sectors of the economy is going to grow more quickly now because economic collapse is being lubricated by oil. It’s no longer just tariff troubles. While Trump keeps pretending a deal is imminent with Iran, the war keeps heating up. Oil companies are telling the president that major fireworks in fuel prices will hit later this month, putting that major impact right at the start of summer when I said the inflation from the war would go critical.

The U.S. Energy Information Administration and other sources began showing that fuel makers were increasingly relying on oil and fuel from their storage tanks to replace products no longer arriving from the Middle East.

“We’re at dangerously low levels already,” said one industry executive who was granted anonymity to discuss private conversations with the administration. “We have shared those concerns at the highest levels of government about what’s coming in mid-to-late June.… I hope they are paying attention to inventories right now. You’re hitting tank bottom.”

Just as I said for the above situation with major stock avalanches, big companies can absorb things for so long, then they start to go critical, and suddenly major slabs of the mountain start to move.

A White House official denied that any senior members of staff have been warned privately by the industry about inventories. “Politico’s anonymous sources are wrong,” the official said.

Denial as a strategy only works for so long to delay a collapse, too. More than one source is saying the same thing:

Exxon Mobil warned Thursday that oil inventories will fall to record low levels in coming weeks, forcing prices to spike and curbing demand.

“We’re approaching unheard of inventory levels,” said Exxon Senior Vice President Neil Chapman at a conference hosted by Bernstein in New York….

“I mean really, really low levels,” Chapman warned. “You can debate whether that’s going to hit, those really low levels, in two weeks or three weeks. Once you get to that point, then you’ll see price shoot up.”

The price of physical Brent oil cargoes will spike to $150 to $160 per barrel when inventories hit all-time lows in coming weeks, the executive said.

Even if the Trump-Israel-Iran War were to end, which it won’t, that wouldn’t improve the tank levels at all in time to stop the late-June arrival at critical levels that shoot prices up.

“I don’t know, whether it’s two to three weeks or three to four weeks,” Chapman said. “What I’m really saying is, once you get to the minimum inventory levels and all-time low inventory levels, there’s only one way to go.

That would be UP in price.

If oil started shipping out of Iran, it wouldn’t arrive here in time to stop oil supply from going critical later this month. That level of shortage is already a fait accompli. If the wars stopped today, it would take months, not weeks, to clear out mines and convince ships it’s safe to travel and then to ship across multiple oceans to arrive at their destinations. So, we are past the point of no return for this economic collapse.