SpaceX Denied VIP Treatment by S&P 500, Lululemon Tanks on Weak Guidance

**Zaid Admani** (0:00)
Public.com presents The Rundown, your daily market update in 10 minutes. My name is Zaid Admani, and today is Friday, June 5th. In today's episode, we'll break down the May jobs report and what it means for the stock market. We'll also tell you why SpaceX just got denied early entry into the S&P 500 Then stick around to the end of the show to find out why the internet now has more bots than humans. We got a great show for you today.
Let's go.
Thursday was a mixed day for the stock market. The S&P 500 was up 0.4% while the NASDAQ fell 0.1%. And I guess I need to mention the Dow Jones here. It was the star of the show rallying 1.7% and closing at record highs. But I still don't care about the Dow. Meanwhile, the S&P 500 told a more interesting story. See, more than 360 stocks in the S&P 500 finished higher yesterday. That's more than 70% of the index. But because the S&P's market cap weighted, the biggest companies have a bigger impact. And yesterday Broadcom, which is the seventh largest company in the S&P, was the problem because it dropped 13% after they reported earnings, wiping out roughly $286 billion in market cap. And that Broadcom sell-off spread across the semiconductor sector, with the SOX index falling more than 2%. So it was a rough day for chip stocks, but the fact that the overall market held up anyways, is probably the most important takeaway. See, for the last two months, the market rally has been carried by AI and chip stocks. But yesterday, we finally saw some rotation into healthcare, financials, industrials and small caps. So this could be the start of a healthy market rotation and a more broad-based rally moving forward. So I'm definitely keeping an eye on that, but I gotta say, though, the S&P 500 is at risk of snapping its nine-week win streak, depending on how today goes. In fact, today's strong jobs report isn't helping. The May jobs report came out this morning, and according to the report, the US economy added 172,000 jobs in the month of May, which was more than double the 80,000 that economists were expecting. On top of that, the unemployment rate held steady at 4.3%. So the fact that the labor market is holding up is good news, but stocks are dropping this morning because the strong labor market also means the Federal Reserve has zero reason to cut interest rates anytime soon. In fact, the strong labor market could open the door for the Fed to hike rates to combat the rising inflation. So yeah, this is a classic case of good economic news being bad for the stock market. And we'll have to see what new Fed Chair, Kevin Warsh, says about it. The next Fed meeting is on June 17th, so we'll find out soon enough.
Let's run through some headlines, starting with SpaceX. We are about one week away from SpaceX's record-breaking IPO, and there was an interesting twist last night to the story. See, there have been rumors circulating that SpaceX could get fast-tracked into the S&P 500 index just weeks after going public. And that would have been very unusual, but also a huge deal. See, once companies enter the S&P 500, every index fund and ETF that tracks the S&P has to buy it. And look, there are trillions of dollars tied to this index. But the thing is, under the existing rules, a company has to be publicly listed for at least 12 months and show profitability before they can be considered for the S&P 500 And remember, according to SpaceX's S1, they lost nearly $5 billion in 2025 Now, SpaceX was pushing for an exemption to these requirements, but the S&P confirmed last night that they will not be changing their rules for SpaceX to give them an early inclusion into the index. And honestly, I think this is the right call. I mean, if you start bending the rules for companies just because they're big in height, then the index loses its credibility. Not to mention, SpaceX is still a high risk stock with a ton of uncertainty. So including them in an index that millions of people's retirement accounts are tied to, I didn't think was the right move. So I'm glad that the S&P won't be changing the rules. And by the way, this also impacts Anthropic and Open AI whenever they go public. Now, this doesn't mean that SpaceX is blocked from all the indices. In fact, the NASDAQ recently changed their rules so SpaceX could join the NASDAQ 100 index within 15 trading days of going public. And then the FTSE Russell shortened their window to just five trading days. So that means that SpaceX will get some of that passive fund buying, just not from the S&P 500 index, which is the biggest pool of money. So yeah, I wonder how this is gonna impact SpaceX's stock post IPO. Let me know in the comments of what you guys think. And also let me know, should SpaceX be allowed to join these indices so quickly? Let's shift gears and talk about Lululemon because this stock is getting hammered today. Lululemon reported earnings last night and slashed its sales and profit forecast for the year, blaming negative commentary in the media and product launches that didn't land with customers. The retailer now expects revenues to fall as much as 1% this fiscal year in the range of 11 billion to $11.15 billion. That is a major step back from the 2-4% growth they were projecting just a few months ago and well below the $11.5 billion in revenue that Wall Street was expecting. The problem for Lulu continues to be the North American market, which is their biggest market by far. Last quarter, comparable sales in the region dropped 5%, making that the fifth straight quarter of declines. And if you zoom in to just the US market, which makes up half of Lululemon's revenue, sales were down 3.6% last quarter, and the company expects sales in the US to decline in the low double digits in the current quarter. On the earnings call, interim CEO Megan Frank partially blamed the proxy fight with founder Chip Wilson, who has spent months publicly criticizing the company's leadership and product direction. I mean, Chip Wilson went full on hater mode and started taking out full page ads in the Wall Street Journal, calling out Lululemon for falling behind the competition like Aloe and Viori. Now, a couple of weeks ago, Chip Wilson and Lululemon did settle their proxy fight. So the interim CEO says that some of the negativity has died down, but Lulu has a long way to go to turn things around. And it's not just their sales taking a hit, their profits are taking a huge hit too. In the last quarter, gross margins fell by more than 4 percentage points to 54%, which was worse than expected. Now, part of that was because of tariffs, but also because traffic to their stores are declining, so Lululemon is being forced to discount their products, and that's hurting their bottom line. So yeah, Lululemon's next CEO, Heidi O'Neill, will inherit a pretty tough situation when she steps into the role on September 8th. At least she gets to enjoy her summer though, right?