Things you need to know
- Stocks closed higher on Friday and are up again this morning.
- US & Iran are supposedly close to a deal –
- Oil down, Bonds Up, Yields down, Gold steady.
- Eco data includes the all important PCE report
- Earnings from DELL, MRVL,. COST & CRM
- Try the Lemon Zucchini Rigatoni.
Good morning. Before we get into any of it – pause for one second and remember why the markets were closed yesterday. Memorial Day isn’t a day off. It’s a day of honor. A day to remember that every flag placed in a cemetery represents a story unfinished… a family changed forever… and a sacrifice made so that the rest of us can enjoy freedoms that too many take for granted.
That sacrifice shall never be forgotten. Honor them first.
Now…let’s go. Friday felt like the Friday before Memorial Day always feels. Volumes were light. Investors and most traders were already at the grill – or mentally preparing to be at the grill – yet stocks still pushed higher on hopes of a deal with Iran was imminent. What caught my attention was the Russell, Transports and Equal Weight S&P quietly outperformed while the Mag 7 took a breather. That’s healthier. That suggests broader participation, not just tech and not just Mega Cap tech..
Here is what it looked like at 4 pm….The Dow made another record…..adding 294 pts or 0.6%, the S&P up 28 pts or 0.4%, the Nasdaq added 51 pts or 0.2%, the Russell added 25 pts or 0.9%, the Transports rose by 163 pts or 0.8%, the Equal Weight S&P rose 75 pts or 0.9% while the Mag 7 ended the day down 48 pts or 0.15%.
Over the weekend — news reports confirmed what many had been expecting…The US and Iran are actively negotiating in Qatar. But let’s be clear. There is NO signed peace agreement. There appears to be a framework being discussed and while a ceasefire remains in place — major issues remain unresolved.
Iran continues to publicly push back on concessions tied to its nuclear ambitions while Washington continues to signal that diplomacy is preferred — but not guaranteed. President Trump said negotiations are “proceeding nicely” but warned that if it isn’t a great deal — there won’t be a deal. Secretary Rubio reinforced the message — diplomacy first… but other options remain on the table. And that was enough for markets to respond.
Overnight traders ripped the war premium out of oil. WTI is down $3.60 this morning to ~$92.97 after trading as low as $89.40. And remember what that means…oil falling is not just an energy story. It’s an inflation story, a Fed story, a bond market story.
The Strait of Hormuz is the key – if they open it, oil tankers will begin to navigate thru, and energy flows will start to normalize. If that happens? Oil goes lower. A lot lower. But let’s not get ahead of ourselves… even if an agreement is reached, energy markets will remain disrupted for months. Energy analysts have warned that ‘full normalization’ of Middle East oil supply may not occur until 2027 due to the scale of disruptions caused by this conflict. Which means oil may not fall as quickly as some think.
Next up — the bond market…or what I always call the adult in the room. Stocks can be emotional. But bonds? They are cold, calculating and eventually they usually get it right. And this morning the message from bonds is pretty clear…
Inflation risk may be easing.
Treasuries are catching a bid on the idea that lower oil could mean cooler inflation. The 2-yr yield is down 6 bps to 4.06%. The 10 yr is down 5 bps to 4.50% – a key level while the 30 yr is easing by 4 bps to 5.02%.
Now all eyes turn to Thursday and the PCE report — the Fed’s preferred inflation gauge. Expectations suggest a mixed picture. Headline inflation is expected to cool m/m. but y/y remains sticky. Core inflation is expected to stay elevated and remind everyone that this fight is not over. And that sets up the debate. Because if PCE comes in hotter than expected…then yields likely move back up and some of this morning’s enthusiasm starts to fade.
But…
if markets decide that falling oil and easing geopolitical tensions are ultimately going to cool inflation over the next couple of months…then investors may choose to look through one hotter print and focus instead on where inflation is headed — not where it’s been. That’s the setup. And Thursday may end up deciding the week.
In terms of the FED – last week traders/investors were pricing in no rate cuts for the remainder of 2026, and a rate hike was becoming more likely. Maybe that changes or maybe not. Warsh is now officially the FED chair – so let’s give it some time…..He says the Fed will remain independent, Trump says that rate cuts will come quickly – THAT’S the rub….so sit tight…Remember, the only way rates can come down is IF the FED shrinks the balance sheet otherwise they risk igniting an inflationary cycle that will rival the 80’s. This is a developing story….so sit tight.
The VIX remains in the complacency zone and that always concerns me.
So naturally…US futures are green across the board. Because the market believes – or at least wants to believe – that progress here ultimately means an end to the conflict. So yes, while the move is real and the enthusiasm is real. The deal is still not signed. Expectations are moving faster than the facts. So, I would say – stick to the plan and proceed with caution.
Gold is down $41 at $4,528 and remains between the trendlines…. with $4,380 as support and $4,650 as resistance. A deal should see gold test support – whether it holds or not is yet to be seen. Much will depend on the tone of any agreement and the speed at which we see oil decline. No deal means gold will keep testing resistance.
Eco data this week includes – Consumer Confidence — 10:00 am ET This one drops right as many of you are reading this — and don’t dismiss it. Because confidence drives behavior. And right now, consumers are sending a pretty clear message…They’re uneasy. Friday’s read on consumer sentiment came in at 44.8 – another decline and one of the weakest readings we’ve seen in years.
Why? Because people feel inflation. They feel higher gasoline prices. They hear about supply disruptions in the Strait. They see grocery bills. They see insurance bills. And they’re beginning to question whether prices are ever really going back to where they were.
In addition – Year-ahead inflation expectations pushed up toward 4.8% while longer-term expectations have climbed as well – well above the range investors have been expecting.
And here’s why this matters…Consumer spending drives roughly 70% of the US economy. If confidence keeps falling — eventually people change behavior. They delay purchases. They trade down. They spend less. And that begins to show up in earnings. Watch this number at 10 am, because if confidence surprises to the upside then it reinforces this morning’s risk-on move. But if it disappoints again – It becomes another reminder that the consumer may not be feeling nearly as good as the market suggests.
Tomorrow brings us the Richmond Fed Manufacturing Index, Dallas Fed Services index. Thursday brings Personal Income and Personal Spending along with the all-important PCE report for April. We will also get New Home Sales, and Building Permits.
Earnings this week – There are five names that matter because they touch the themes driving this market right now – AI spending, enterprise demand and the health of the consumer.
Marvell (MRVL) This one matters because it sits right in the middle of the AI infrastructure buildout. Everyone talks about chips…Marvell helps enable the ecosystem around them. Options are implying a meaningful move and investors want to know – Is AI spending continuing to broaden beyond the obvious names?
Salesforce (CRM) This is probably the headline event. CRM has had a rough year and expectations have come down. That means the bar may finally be reasonable. What investors want to hear is simple: Are companies still spending on software? And more importantly – is AI actually generating revenue? Agentforce (CRM’s AI Agent Platform) growth has been strong. Now management needs to prove it translates into real business. And remember – This is a Dow component.
HP (HPQ) Quietly interesting. This becomes another test of whether AI enthusiasm is creating actual hardware demand or if the excitement is getting ahead of reality. Watch the guidance.
Costco (COST) Forget the stock for a second. This is a consumer report. Traffic. Basket size. Membership trends. What are people buying? Are they trading down? Are they stretching budgets? Costco gives us one of the cleanest reads on the American consumer. And in a market obsessed with inflation and growth -those matters.
Dell (DELL) This one is all about AI infrastructure. Servers. Enterprise spending. Buildout. Demand. After last quarter – expectations are elevated. If Dell delivers – it supports the idea that the AI trade still has legs. If they disappoint – people will start asking whether the buildout is running ahead of demand.
Bottom Line Wednesday night into Thursday becomes the next real test. Salesforce is the headliner. Costco tells us about the consumer. Dell and Marvell tell us whether AI spending remains real.
This morning European markets are a bit weaker…. France down 1%, while the UK is up 0.7%.
US Futures are UP …. Dow futures up 200 pts, S&P’s up 52 pts, the Nasdaq up 320 pts while the Russell is up 31 pts. The long weekend is now behind us. Summer is in full swing…
The S&P closed at 7473 – up 28 pts. Friday ended with records. Tuesday may start with euphoria. Oil is down. Bonds are rallying and futures are green across the board. The chart still looks beautiful. Up and to the right. And now we have a genuine geopolitical catalyst that – if it actually materializes – removes so much uncertainty and the single biggest inflation threat. But we are not there yet. The deal isn’t signed. The Strait isn’t open. Ships aren’t moving.
So, participate. Stay positioned. Trust your plan. And don’t get FOMO’ized.
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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Lemon Zucchini Rigatoni
This is a great summer dish.
For this you need: green zucchini, garlic, lemon juice, Pecorino Romano Cheese, s&p. olive oil, butter, parsley, chicken broth (or vegetable broth if you prefer) and the Rigatoni.
Begin by slicing the zucchini into rounds.
Take a large, deep sauté pan- add the olive oil and heat it up. Next – add in the zucchini, season with s&p and caramelize. Keep heat high, move the zucchini around – do not let them burn. – Once they are caramelized – remove and set aside. (Maybe 10 mns)
In the same sauté pan – add ½ lb. of Rigatoni and coat with the oil. Next -add in sliced garlic and the chicken broth – enough to cover the pasta.
Squeeze the juice of half of one lemon into the pan. Cook until the pasta is aldente – if you need to add a bit more stock – go ahead…. You want it moist, not soupy.
Once it is done – add in a tblsp of butter to coat the pasta. Now add a handful of chopped parsley and the zucchini. Mix well. Now add in a handful or two of the Pecorino Romano – mix.
When serving – dust with a bit more cheese and a drizzle of good olive oil
Buon Appetito