The Morning Call
5/5/26
The
Market
Technical
Monday in the
charts.
Summary:
On this Star Wars Day, it appears we are back - for now - to focusing on
Iran (headline roulette) as Trump's 'Project Freedom' plans offered 'A New
Hope' but were dominated by Iran's renewed attacks 'Striking Back' against UAE
(sending oil higher). And that triggered the 'old' regime back into
action with yields up (30Y>5.00%), rate-hike odds jumped, stocks
down, and gold down (EM piggy bank). Crypto went full retard but ended at
highest since Jan... Just when you thought it was safe to totally ignore what's
going on in Iran, we get some action again (though dip-buyers were active).
Monday in the
technical stats.
https://www.barchart.com/stocks/momentum
https://www.barchart.com/stocks/market-performance
https://www.barchart.com/stocks/sectors/rankings
https://www.barchart.com/stocks/signals/new-recommendations
Goldman: Just a matter
of time until we get a flush.
Summary:
The S&P has closed at record highs three weeks in a row, even if 4 of the
last 5 record highs were hit on negative breadth (more decliners than
advancers). And while sentiment has inflected higher per “official” metrics,
Goldman derivatives guru Brian Garrett cautions in his weekend prep note late
on Sunday (available to pro subs),
that conversations on the bank's desk continue to focus on how spot
price is missing the big picture and it’s only a matter of time until you get
the 3-5% flush (at these levels, even a 300bps sell off won’t get spx
below 7,000).
Counterpoint.
https://www.zerohedge.com/markets/us-equity-rally-lacks-usual-signs-top
Summary:
The S&P 500 should be resilient while Iran uncertainty lingers,
as the market rewards the AI earnings chain and hasn’t yet shown the
retail exuberance or narrative exhaustion that usually precede a top. US
equities have absorbed a hawkish Fed tilt, higher oil and another round of
headlines that suggest no clear off-ramp to the war is near.The market is
treating the situation in the Strait of Hormuz as a price shock rather
than a supply shock, and.....is treating the Fed as less important
than earnings, unless tighter policy turns into a liquidity problem.The
cleanest explanation is that US equities have become one continuous AI
value-chain trade. Leadership rotates rapidly across the bottlenecks:
accelerators and memory chips, fabs needed to build them, power generation,
on-site solutions and cloud platforms.As a result, capacity constraints due to
growing demand are creating strong earnings from Mag7, semis and other AI
infrastructure names, driving the entire market. Broader earnings are
backing that up.
Tuesday morning
setup: Stock futures are higher, completely reversing yesterday's drop with
dip-buyers out in force as a fragile ceasefire between the US and
Iran held after a day of clashes and sentiment is helped by a pullback in
oil prices, with Brent crude futures down 1.4% as well as the US move to return
22 Iranian crew from a seized vessel. The conflict “might need to escalate in
order to de-escalate,” making any market weakness a chance to add
positions in stocks, according to JPMorgan strategists who said that today
is shaping up to be an "Everything Rally." As of 8:00am ET,
S&P 500 futures rise 0.3% while Nasdaq 100 contracts add 0.6%. In premarket
trading, semis lead gains with Mag7 mostly higher. Cyclicals (ex-Energy) are
outpacing Defensives, though healthcare is rallying. Bond yields are down
1-2bp with the 10Y yield dropping to 4.42% and the Dollar catching a bid.
Commodities are seeing sales in Energy, precious metals retracing losses, and
Ags mixed. US economic data calendar slate includes March trade balance (8:30am),
April S&P Global US Services PMI (9:45am), April ISM services and March new
home sales and JOLTS job openings (10am). Fed speaker slate includes
Bowman (10am) and Barr (12:30pm)
Fundamental
Headlines
The
Economy
US
March factory
orders were up 1.5% versus forecasts of +0.5%; ex transportation, they were up
1.6% versus +0.7%.
The March trade
balance was -$60.3 billion versus predictions of -$60.5 billion.
International
April UK YoY new car sales grew 24.0% versus
estimates of +5.1%.
Other
Five takeaways from the first quarter GDP
report.
https://talkmarkets.com/article/five-big-takeaways-from-the-first-quarter-gdp-report-1777711399
More insight into the Q1 GDP report.
https://bonddad.blogspot.com/2026/05/long-leading-indicators-in-q1-gdp-point.html
Iran
Overnight news.
China defies US sanctions.
Monetary
Policy
The new Fed may cut rates without much rate impact.
Inflation
Is stagflation in the air?
The latest figures on government debt and
inflation.
Inflation keeps on trucking.
https://www.advisorperspectives.com/commentaries/2026/05/04/wwwd-john-mauldin?firm=mauldin-economics
Is
Europe sliding towards stagflation?
https://www.zerohedge.com/economics/europe-sliding-towards-stagflation
AI
The AI apocalypse that probably won’t happen.
A
closer look at hyperscalers’ AI spend.
https://om.co/2026/04/30/what-i-learned-about-hyperscalers-ai-spend/
The AI wave continues and it is a big one.
Investing
Where the money is coming from.
https://www.warman.life/blog/2026-04-30-where-the-money-is-coming-from/
Rates are breaking
things---equities don’t see it yet.
https://www.zerohedge.com/the-market-ear/rates-are-breaking-things-equities-just-dont-see-it-yet
Summary:
US 10-year is trading above the key 4.4% level, breaking out of a large
triangle formation. A push a bit higher from here, and things could get messy
quickly.
Source: LSEG Workspace
Above 5%
US
30-year is trading just above the key 5% level. A close above 5.1% would push
it into uncharted territory.
Risk/reward
not as alluring as it was.
Summary:
i. don’t lose sight of the big picture: it’s a bull market and the
primary trend is higher; that’s the ballpark that we’re still playing
in. ii. the baseline views of the house are constructive: 2.1%
GDP growth and 12% earnings growth should drive S&P to 7600. iii. alongside
this, AI continues to capture the market’s imagination, and we’re
living through a once-in-a-generation capex super cycle.iv. now, given the
magnitude of the rally since the end of March, risk / reward is not as
alluring as it was -- so, my preferred construct is long delta
/ long vol. v. said another way: own your highest conviction
names (I prefer global AI expressions) and build hedges when
the market offers cheap insurance (e.g. 1-month expiry ATM puts on
S&P cost less than 2% of spot; consider that the cost of a good night’s
sleep).
Unpredictability creates
alpha.
https://klementoninvesting.substack.com/p/unpredictability-creates-alpha-stock
Update
on valuation.
A robot economy.
https://www.advisorperspectives.com/commentaries/2026/05/04/robot-economy-who-rich-who-left-behind
Beware a repricing
of the bond market.
Summary:
The US debt-to-GDP ratio has reached 100.2%, with debt exceeding the size of
the economy, and is expected to reach 107% by 2030. Despite high nominal yields
on 10-year US Treasury bonds, the yield after expected inflation is around 2%,
indicating that the market is not worried about debt.A bond bubble could be
more dangerous than an equity bubble, as a drop in bond prices would reprice
risk throughout the economy, causing disruptions and potentially leading to
liquidity issues for banks and corporations.
News on Stocks in Our Portfolios
What
I am reading today
Bizarre
moment at Berkshire meeting highlights cyber risk.
https://www.tker.co/p/warren-buffett-greg-abel-berkshire-hathaway-2026-meeting-ai-cyber-risks
The largest Viking Age coin hoard
ever found in Norway.
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