Market Notebook

PRICE ACTION:
Equity prices, as measured by the ticker SPY, closed higher while bond prices, as measured by the ticker BND, closed lower over the last week.

SPY     +2.35%
BND     +0.26%

TECHNICAL ANALYSIS:
SPY price appears to be trending higher.

BND price appears to be entering consolidation.

SENTIMENT:
The CNN Fear & Greed Index moved to 67 out of 100, a reading of Greed, while the VIX edged up to 17.5 \[LongDash] a moderate reading that suggests investor confidence is high but not yet complacent.  The mood in the market is being driven almost entirely by the AI earnings super-cycle, with investors willing to look past geopolitical turbulence as long as the technology sector continues to deliver.

ECONOMY AND FUNDAMENTALS:
The week’s most volatile session was Monday, when the United Arab Emirates said it had intercepted a number of Iranian missiles \[LongDash] the first activation of the UAE’s missile alert system since the ceasefire began April 8. Oil prices surged, with Brent crude jumping nearly 6% to settle above $114 per barrel,  while the Dow dropped more than 550 points. The drama was short-lived. By Friday, with peace talks continuing and Trump’s “Project Freedom” initiative to free stranded vessels gaining traction, crude oil fell 7.28% for the week to close at $94.90 per barrel.  The volatility within the week \[LongDash] from $114 Brent to below $95 \[LongDash] illustrates how the energy market remains hostage to a fragile and unresolved geopolitical situation.

On the earnings front, the season closed in style. With roughly 440 S&P 500 companies now reported, 83% beat Q1 estimates \[LongDash] above both the four-quarter average of 78% and the historical average of 67%. Net profit margins hit a record 13.4%, and full-year 2026 EPS growth is now projected at 24%.  The week’s standout report came from AMD, whose first-quarter revenue of $10.25 billion beat estimates, with data center sales increasing 57% to $5.8 billion. The stock surged 26% on the week  as investors validated the thesis that Nvidia is not the only semiconductor company capable of capturing the AI infrastructure buildout. Palantir also beat handily, reporting 85% revenue growth \[LongDash] its fastest rate since going public \[LongDash] and raising its full-year free cash flow guidance to $4.2 to $4.4 billion.  The stock fell modestly, however, as the results were largely priced in at its elevated valuation.

The labor market continued to deliver positive surprises. The U.S. added 115,000 jobs in April, well above expectations for 65,000 additions, while the unemployment rate held steady at 4.3%.  Job gains were led by health care, transportation, and retail trade, while federal government employment continued its decline. The report reinforced the view that the U.S. economy remains on solid footing even as energy prices and inflation run above the Fed’s comfort zone.

On the institutional front, the Federal Reserve’s leadership transition continued to move toward conclusion. Kevin Warsh cleared the Senate Banking Committee last week, and a full Senate vote is expected shortly, with Powell’s chairmanship officially concluding May 15. The incoming chair will inherit a divided committee, elevated inflation, a robust labor market, and a geopolitical situation that has no clear resolution date \[LongDash] a formidable set of challenges for the Fed’s new era.

All the best during the week ahead!

Disclaimer: Nothing in this discussion should be considered investment advice. The content of this discussion is strictly my personal opinion and subject to change at a moment’s notice. Investment advice can only be provided to you by your investment professional and not by a general market discussion such as this one. If you wish to speak with an investment advisor, contact us. We can probably help.