Things you need to know
- S&P enters another new century! Dow crosses 50K.
- New Highs/New Lows – pay attention to the story.
- Bonds steady, Oil up, VIX up.
- Iran allows ships to navigate the Strait – but at a price.
- Europe markets lower, US futures lower
- Try the Veal & Potato Meatballs
Good morning – it’s go time.
The bulls continue to stay in control as investors, traders and algo’s continued piling into AI, semis and anything tied to the digital infrastructure buildout… pushing the major indices to fresh record highs and driving the Dow above the historic 50,000 level for the first time ever while the S&P crossed over into another new century mark. Let me repeat that – The S&P closed at 7501 – ANOTHER new century mark… and the speed of this move is nothing short of remarkable.
Remember – on March 30 – the S&P ticked at 6,316 in what looked like a potential disaster….as the Iranian conflict was one month old causing angst for investors. But that was the low – the reversal in sentiment was driven by a ‘de-escalation’ talk and the sense that the world was going to come down hard on Iran, bringing the conflict to an end. Since then – the S&P has advanced 18.7%!
April 15th — we broke thru 7000.
April 17th — 7100.
April 30th — 7200.
May 6th — 7300.
May 11th — 7400.
And yesterday? 7500.
Think about that. Five new century marks in ONE month. And it’s all being driven by tech, AI and the second and third derivatives of that story — semis, networking, data centers, power demand, cooling systems, cybersecurity, cloud infrastructure… basically anything connected to the AI buildout has become the place investors want to be. So, just to be clear – this is NO longer just about NVDA.
At 4 pm – here is what it looked like. The Dow gained 370 pts or 0.75%, the S&P added 57 pts or 0.8%, the Nasdaq surged 232 pts or +0.9%, while the Russell added 19 pts or 0.7%. The Transports gained 276 pts or 1.4%, the Equal Weight S&P added 30 pts or 0.4% while the Mag 7 tacked on another 180 pts or 0.5%.
It’s all good! Or is it? Now here’s where things get interesting… because despite all the excitement over Dow 50,000 or S&P 7500 – the internals of this market are weaker than the headlines suggest. Yesterday was another textbook example of what is known as “narrow breadth.”
Narrow breadth is when a handful of mega-cap tech and AI names are doing almost ALL the heavy lifting all while a large portion of the market quietly struggles underneath the surface. So yes, the S&P closed at another record high, BUT there were only 42 stocks making new 52-week highs… while 114 stocks hit new 52-week lows.
*KEY thought – declining stocks outnumbered advancing stocks.
Think about that. More stocks were breaking DOWN than breaking OUT… even as the index itself pushed to new highs. That’s what happens when the market becomes overly concentrated. And that is the reason I keep telling you to make sure you have a properly diversified, well-balanced allocation – this is what helps you navigate the waves…
7 of the 11 S&P sectors finished higher yesterday – Tech +1.5%, Energy + 0.8%, Financials + 0.6%, Industrials & Utilities +0.5%, while Consumer Staples and Communications rose 0.3%. We saw weakness in Consumer Discretionary – 0.1%, Healthcare – 0.1%, Real Estate – 0.7% and Basic Materials – 0.75%.
Down the chain – we saw Homebuilders up 1.1%, Retail +0.8%, Airlines +0.3%, Disruptive Tech -0.1% (surprising), the Value trade +0.25%, the Growth trade + 1.2%, Emerging Markets + 0.25%, Cybersecurity up a whopping 3.3%, Semi’s + 0.3%, Software + 2.3%, Aerospace & Defense – 0.6%, Quantum Computing +4.5%, Exploration & Production + 0.5%, Nuclear & Uranium – 1.3%, Biotech -0.7% while Small Caps gained 0.6%.
We can also credit the move to a combination of “good enough” economic data, easing bond yields and renewed optimism surrounding the Trump/Xi summit in Beijing – where early reports suggested progress on trade discussions and even cooperation around AI infrastructure and technology. That was all the excuse investors needed to keep chasing risk higher.
And then there was Cisco. It exploded – surging more than 13% after crushing earnings expectations, raising guidance and doubling down on its AI strategy — reinforcing the idea that this AI buildout is no longer just about NVDA chips. This is now about networking, enterprise architecture, cloud buildout and data-center modernization. Let’s call it an “AI ecosystem” day. And the Momo guys loved it.
Let me be clear – I am not saying the story is wrong. Far from it. The AI revolution is real, and it is changing the investment landscape in ways we’re only beginning to understand. But I will tell you this — the tone of this market is starting to feel a bit “giddy” to me… and THAT is another warning flag. It’s not a sell signal. Not a panic signal. It’s a ‘remain disciplined’ signal.
Because when investors start chasing (and that is what is happening) anything with “AI” attached to it… when five new S&P century marks happen in one month… when the same handful of stocks are dragging the entire market higher while breadth deteriorates underneath the surface — you have to recognize that emotions are beginning to take over. And that’s exactly when people get FOMO’ized. You do NOT need to chase the hottest trade on earth at the exact moment everyone else suddenly decides they can’t live without it. That’s usually when mistakes get made.
Now let’s talk about bonds… because while stocks were celebrating, the bond market continues to send a much more cautious message – especially since we got that scorching hot PPI report on Wednesday.
Bond yields pushed higher, kissing the ‘danger zone’ on all 3 measures – the 2 yr, the 10 yr and the 30 yr. (4%, 4.5% and 5% respectively). Now yesterday, they did NOT push higher and in fact – they eased off a bit and that gave the Momo crowd and algo’s a reason to keep going…Why? Because yields did not go higher!
The very slight easing in yields only added to the excitement. BUT make no mistake – Tuesday’s HOT CPI and Wednesday’s HOTTER PPI has changed the conversation. Those data points reinforced the idea that inflation pressures are broadening and that the Fed is now backed into a corner…. Just when the baton gets passed from JJ to Kevy. Now, this is going to be interesting…How will Kevy convince the committee and street analysts/economists that rates have to come down? It is NOT happening, at least not yet…and yet, stocks keep climbing.
Yesterday’s Retail sales came in at +0.5% versus expectations of +0.4% — hardly a blockbuster — but good enough to calm recession fears and support the “soft landing” narrative. Jobless claims at 211k also reinforced the idea that the labor market remains solid without overheating. So, the economy is slowing… but not breaking. Inflation is sticky… but not spiraling all while investors continue betting that AI productivity will ultimately overpower everything else.
Meanwhile oil prices eased a bit yesterday after reports that roughly 30 Chinese vessels — along with several LPG and crude carriers bound for India and Japan — successfully crossed the Strait of Hormuz under what Iran is now calling an “Iranian Management Protocol.”
WHAT? Iran appears to be selectively allowing energy shipments to move again — particularly those tied to China and India — which helped calm immediate fears of a complete supply shock. But let’s not kid ourselves… this situation remains volatile…. Because while some ships got through safely… there were ALSO reports of an unidentified vessel being seized near the UAE and an Indian-flagged ship sinking off the coast of Oman after what’s believed to have been a drone or missile strike.
So yes — there is progress. But no, it is NOT stable.
In fact, what’s emerging looks more like a controlled choke point than a fully reopened international waterway. And here’s where it gets even more interesting…Iran is reportedly now charging what many are calling a “Tehran Toll Booth” fee – somewhere between $1 million and $2 million per ship – payable in yuan or crypto – in exchange for safe passage through designated shipping corridors controlled by the IRGC. A strategic global energy chokepoint is now effectively operating under an armed escort and fee-for-passage system.
That may temporarily ease shipping flows… but it also creates an entirely new layer of geopolitical, legal and inflation risk because companies paying those fees could ultimately face sanctions. So, while yesterday’s successful transits helped cool some of the personalities – the broader message is this – The Strait is not “open.” It is being managed and the market is still trading every headline accordingly.
Yet the VIX closed at 17.26 – down 3.4%, which feels way too complacent considering everything going on in the world right now. Because remember… risk does not disappear. It just gets temporarily mispriced.
This morning the VIX is up $1.50 or 9% at 18.83 – taking it up and thru trendline resistance – If the VIX continues climbing toward 20+ — expect the pressure on equities to intensify.
And then there’s the Fed… or maybe more importantly… what comes NEXT at the Fed. The market is increasingly beginning to price in what I’ve been calling the “Warsh Effect” — the idea that Kevin Warsh could bring a much more disciplined and inflation-focused framework to monetary policy. Which means NO CUTS FOR YOU……
Today’s Eco data includes Empire Manufacturing, Industrial Production and Capacity Utilization.
Key earnings – none. But there are a lot of stocks going EX-Dividend today…. KKR, EMR, DUK, CEG, DD, LLY, XOM, AMGN, HSY, HON, CTAS.
European markets are under pressure – all down more than 1.25%…the focus today is all about brewing inflationary pressures…HELLO??? Suddenly, they are worried about ‘brewing’ pressures! What happened to the AI trade???? In the UK PM Starmer is taking his last breath as PM…. There is a revolt taking place there…and the outcome is still cloudy…. More next week.
US Futures are also under pressure – guess why??? …. Dow futures down 215 pts, S&P’s down 61 pts, the Nasdaq down 340 pts while the Russell is down 25 pts.
The S&P closed at 7501 (a new century) – up 57 pts – this morning it feels a bit like ‘profit taking’ and no one should be surprised at all. The chart has gone parabolic – so as an investor you should WANT a pullback – remember – trees do not grow to the sky. No, if you look at the chart – it would not surprise me to see us pull back to the 7150/7200 range….which would be a 4% pullback…That would be nice, it would shake the branches a bit and force the weak hands to fall out…all while providing an opportunity for long term investors to buy stocks at better prices….
My advice? Enjoy the ride — but stay disciplined. DO NOT make emotional, FOMO-driven decisions – in EITHER direction.
Stay focused. Stay in quality. Stick to your plan. A plan that should be based on who YOU are, your age, your risk tolerance and your liquidity needs. Feel free to call me at 561-931-0190 to discuss.
Take good care,
Kp
[email protected]
Source: Bloomberg, CNBC, Reuters, Wall Street Journal
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Potato & Veal Meatballs with Carrots & Artichokes
These are great as appetizer type cocktail party dish or can be paired with a mixed green salad and become a light lunch or dinner meal.
For these you will need: 1 lemon, bag of frozen artichokes, 2 lg Idaho potatoes, 2 lbs. of ground veal, finely chopped thyme, 2 lg egg yolks, fresh grated parmegiana cheese, whole milk, s&p, butter, olive oil, about 3 cups of beef broth, 4 med carrots – peeled, cut in half lengthwise and then cut into bite size chunks, 1 shallot diced, splash of dry white wine, ˝ c of heavy cream, and chopped parsley.
In a saucepan, bring beef broth to a simmer; remove from heat and cover to keep warm.
Next boil the quartered potatoes in salted boiling water until soft – maybe 15 mins? Drain and then crush in a classic potato ricer into a large bowl.
Add veal, thyme, 1 egg yolk, cheese, milk and s&p. Mix well with your hands -do not over mix.
Form into balls…. bigger than a golf ball but smaller than a baseball.
In a large nonstick high sided pan – heat a dollop of butter and a bit of olive oil over medium-high heat – fry meatballs, turning occasionally, until well browned and cooked through, – depending on the size will dictate the time….small balls – 4 mins or so…larger balls – maybe 7 mins or so….remove and set on a plate lined with a paper towel.
Add a bit more olive oil in the nonstick pan and heat on med high. Add shallots and sauté for 3 mins….
Now add artichokes & carrots. Cook, stirring frequently, for about 4 mins.
Add wine and broth – bring to a boil, reduce to a simmer and cook for 10 minutes. Now add meatballs (If you like – you can add in a bag of frozen peas at this point in the process) and continue cooking for about 10 more mins…. gently turning meatballs halfway through. You want the veggies to be nice and tender.
In a separate bowl – squeeze 1 teaspoon juice from the lemon. Whisk together with the remaining egg yolk and cream. Carefully introduce this mixture into the pot with meatballs. Return broth to simmer and cook for 3 minutes. Sprinkle with parsley.
Buon Appetito