Weekly Trader's Outlook

If you read last week's blog, you might recall that I had a "Volatile" forecast for this week, citing stretched technicals, particularly in the AI infrastructure trade, and several potential catalysts, including the monthly inflation reports and a key meeting between Trump & Xi. Stocks experienced both upside and downside volatility this week. The PHLX Semiconductor Index (SOX) hit a fresh all-time high on Monday, but stocks are seeing some "risk-off" sentiment on this options expiration Friday in response to spiking Treasury yields. U.S. Treasury yields are breaching several key levels across the curve today (2-year > 4.0%, 10-year > 4.50%, 30-year > 5.0%). Additionally, global bond yields are also seeing technical breakouts – for example, Japan's 10-year government bond (JGB) is at the highest level since 1997, UK 10-year yields are at the highest level since 2008, and France's 10-year is at the highest level since 2009. There are several factors influencing yields, including higher oil prices (WTI crude is up 10% this week to ~$105/barrel), a lack of progress in Iran peace hopes, hotter-than-expected inflation readings and the passing of the baton to a new Fed Chair (more on this in the "Economic Data, Rates & the Fed" section below).

President Trump's highly anticipated meeting with China's President Xi Jinping took place over the last 48 hours, but China didn't seem to provide any assistance towards finding a peaceful resolution to the Iran conflict, and there appeared to be some degree of tension related to questions around Taiwan's independence. Russian President Vladimir Putin is expected to meet President Xi in China next week, according to reports from the South China Morning Post.

Regarding the status of the Q1 earnings scorecard, out of the 454 S&P 500 companies that have reported, 73% have beat on the top line and 81% have beat on the bottom line. Q1 revenue growth has been tracking at 10.50% while EPS growth is 25.09% thus far, roughly in-line with the metrics from last week.

At the time of this writing (2:35 PM ET) stocks are lower across the board and hovering near the lows of the day as Treasury yields remain near the highs of the session (DJI - 476, SPX - 67, $COMP - 284, RUT - 64). Higher yields are not necessarily a bull market killer, because it depends on a) why they are going up (growth vs. inflation) and b) the velocity of the move. However, breaking out to fresh cycle highs is significant, and if the 30-year Treasury yield closes at current levels today (5.129%), it would represent just that. Perhaps higher yields are just providing traders enough of an excuse to take profits following a six-week surge in stocks. Perhaps today's standard monthly options expiration is playing a role, given lop-sided bullish positioning in the tech space. In any event, if stocks continue to pullback next week, it would just be considered standard, healthy consolidation given the magnitude of the bull run that we've seen over the past six weeks. Next week will be interesting with Nvidia earnings coming out after the bell on Wednesday (May 20th). While expectations are likely high (given the recent run in the stock), and the company will likely deliver strong results (given the reads from other chips stocks and increased CapEx budgets), I think the potential for a "sell on the news" reaction, regardless of the results, within the chip space is a possibility. The reason is because after Nvidia's earnings, there is a bit of an air pocket, or a lack of bullish catalysts to reinforce the AI infrastructure theme (Yes, Broadcom reports on June 3rd, but that's essentially the last one). During the thick of earnings season, investors were getting multiple earnings reports from the chip stocks week after week, which continued to reinforce the strength of the demand for compute. I also think that chips stocks could experience some mean reversion in relation to the software space, which appears to be showing signs of life again (more on this in the "Technical Take" section below). I understand that the S&P 500 and Nasdaq Composite hit fresh all-time highs this week, and remain in bullish technical uptrends, but perhaps the confluence of rising bond yields, the potential for higher oil prices (given the lack of progress with Iran), and the effective ending to Q1 earnings season will provide enough of a catalyst for some healthy consolidation in stocks. Therefore, I'll provide a "Moderately Bearish" forecast for next week. I acknowledge that the AI infrastructure trade could see some dip buying early next week given today's pullback. I also understand that Treasury yields could attract some buyers and yields could move lower next, which would likely be bullish for stocks. And lastly, I acknowledge that Nvidia could deliver stellar results and reignite the animal spirits, but I feel that the confluence of factors highlighted above shift the tea leaves towards a potential period of digestion.

• Monday (5/18): NAHB Housing Market Index, Net Long-Term TIC Flows
• Tuesday (5/19): Building Permits, Housing Starts, Pending Home Sales
• Wednesday (5/20): EIA Crude Oil Inventories, MBA Mortgage Applications Index
• Thursday (5/21): Continuing Claims, EIA Natural Gas Inventories, Initial Claims, Philadelphia Fed Index
• Friday (5/22): University of Michigan Consumer Sentiment

• Monday (5/18): Agilysys Inc. (AGYS), Baidu Inc. (BIDU), iQIYI Inc. (IQ), Renew Energy Global PLC (RNW), Ryanair Holdings PLC (RYAAY), Trip.com Group Ltd. (TCOM), XP Inc. (XP)
• Tuesday (5/19): Amer Sports Inc. (AS), Bilibili Inc. (BILI), CAVA Group Ltd. (CAVA), CMB TECH NV (CMBT), Eagle Materials Inc. (EXP), Home Depot Inc. (HD), Ke Holdings Inc. (BEKE), Keysight Technologies Inc. (KEYS), MakeMyTrip Ltd. (MMYT), Toll Brothers Inc. (TOL), ZTO Express Inc. (ZTO)
• Wednesday (5/20): Analog Devices Inc. (ADI), EnerSys (ENS), GDS Holdings Ltd. (GDS), Hasbro Inc. (HAS), Intuit Inc. (INTU), Lowe's Companies Inc. (LOW), Nordson Corp. (NDSN), Nvidia Corp. (NVDA), Target Corp. (TGT), TJX Companies Inc. (TJX), Williams-Sonoma Inc. (WSM), Urban Outfitters Inc. (URBN)
• Thursday (5/21): BJ's Wholesale Club Holdings Inc. (BJ), Copart Inc. (CPRT), Deckers Outdoor Corp. (DECK), Deere & Co. (DE), NIO Inc. (NIO), Ralph Lauren Corp. (RL), Ross Stores Inc. (ROST), Take-Two Interactive Software Inc. (TTWO), Walmart Inc. (WMT), Workday Inc. (WDAY), Zoom Communications Inc. (ZM)
• Friday (5/22): Booz Allen Hamilton Holding Corp. (BAH), Global Ship Lease Inc. (GSL)

There was a solid dose of economic data for markets to digest this week, highlighted by the two monthly inflation reports and the monthly retail sales data. The Consumer Price Index (CPI) was slightly warmer than expected but the Producer Price Index (PPI) was much hotter than expected. The reports helped push treasury yields higher across the board this week, but there were several other factors in play, including dampened hopes around a potential Iran peace deal following the highly anticipated meeting between Trump/Xi. On an economically encouraging note, April retail sales were firm, which suggests a resilient consumer spending environment despite higher gas prices (even if it is being supported by the top half of the "K" economy). Also noteworthy, the Atlanta Fed upwardly revised its "Nowcast" for Q2 GDP to 4.0%. Here's a breakdown of the reports:

• Consumer Price Index (CPI): The headline CPI rose 0.6% in April (in-line with estimates), which puts the annual inflation rate at +3.8% (+0.1% above expectations). The annual inflation pace is the highest since May 2023. Core CPI rose 0.4% in April, which translates into a +2.8% annual inflation rate (both 0.1% above consensus estimates).
• Producer Price Index (PPI): The headline PPI rose 1.4% in April, well above the 0.5% Dow Jones consensus estimate. This was the largest monthly gain in the PPI since March 2022. On an annual basis, headline PPI jumped 6.0%, which represents the biggest increase since December 2022. Core PPI rose 1.0% in April, well above the 0.4% expected and the largest gain since early 2022. This puts the annual core PPI gain at 5.2%, well above the +4.3% expected.
• Retail Sales: U.S. retail sales rose 0.5% in April following last month's (0.1% downwardly revised) 1.6% gain. Control-group sales, which feed directly into GDP rose a larger-than-expected 0.5%. Gas station receipts were a key contributor with retail sales ex-gas stations rose just 0.3%.
• Business Inventories: U.S. business inventories rose 0.9% in March, well above the 0.2% Briefing forecast and the largest gain since June 2022.
• NFIB Small Business Optimism: Rose 0.1 points in April to 95.9 from the prior month. The Uncertainty Index fell 4 points from the prior month to 88.
• Existing Home Sales: 4.02M vs. 4.10M est.
• Capacity Utilization: 76.1% vs. 75.8%.
• Empire State Manufacturing: 19.6 vs. 10.0 est.
• Industrial Production: 0.7% vs. 0.3% est.
• EIA Crude Oil Inventories: -4.31M barrels.
• EIA Natural Gas Inventories: +85 bcf.
• Initial Jobless Claims: Initial applications for US jobless benefits increased 12K from last week's (downwardly revised) 199K, which was above the 205K economists had expected. Continuing Claims increased 24K from the prior week to a seasonally adjusted 1.782M, which was below the 1.79M expected.
• The Atlanta Fed's GDPNow "nowcast" for Q2 GDP was revised up to 4.0% yesterday from 3.7% last week. The increase was primarily driven by consumer spending (retail sales report).

U.S. Treasury yields are spiking across the board today, which appears to be driven by several factors - higher oil prices, hot PPI data, Powell's last day/incoming Warsh, lack of progress on Iran peace deal following Trump/Xi visit, rising global yield environment (JGB's @ 29 year high for example). Technically, there are several key levels that are being breached (to the upside) today – 4.0% on the 2-year, 4.50% on the 10-year and 5.0% on the 30-year. For reference, the cycle high for the 30-year is 5.15-5.28% on an intraday basis and I've got 5.087% on a closing basis on my chart, so breaking out to fresh cycle highs is significant from a technical perspective. Compared to last Friday, 2-year Treasury yields ticked up ~1 basis point (4.077% vs. 3.895%), 10-year yields declined slightly (4.577% vs. 4.364%), while 30-year yields decreased ~2 basis points (5.112% vs. 4.949%).

Market expectations around the Federal Reserve's monetary policy saw a notable jump this week, driven by hotter inflation data, higher oil prices and potentially a more hawkish tilt with Warsh taking the helm as Fed Chair. Per the Bloomberg rate probabilities, markets are putting a roughly 79% chance (from just 9% last Friday) of a rate hike at the January FOMC meeting and a theoretical 100% chance (from 22%) of a rate hike at the March 2027 FOMC meeting.

I'm highlighting the Russell 2000 index (RUT) this week because of both today's spike in yields and the RUT's relative underperformance (small caps are historically more sensitive to rising rates), and a few bearish developments, technically speaking. Here's what I'm seeing on the charts a) the RUT is dropping below its 10-day Simple Moving Average today after finding support at this indicator over the past three days b) the RUT has dropped below the uptrend line from the March 30th lows c) there appears to be a negative divergence in the relative strength index (RSI) and d) the MACD is showing a bearish cross-over. I understand the RUT is only 3.1% off its all-time high that it hit last week, and these are just some early observations, so I don't want to draw too much from the price action, but there is enough here to at least warrant some near-term caution.

Near-term technical translation: moderately bearish

I'm highlighting the software space this week, as represented by the iShares Expanded Tech-Software ETF (IGV), because there are two bullish catalysts: a) Software design firm Figma delivered a "beat and raise" quarter after the bell and the stock is up 15% today and b) Activist Investor Bill Ackman said that his investment management company Pershing Square has taken a new stake in Microsoft, citing a "highly compelling valuation". For reference, here are IGV's top 10 holdings: ORCL (9.70%), MSFT (8.18%), PANW (7.20%), PLTR (7.13%), CRM (5.87%), CRWD (5.54%), APP (4.92%), SNPS (3.69%), ADBE (3.68%), INTU (3.68%). Technically, there are several bullish developments on the charts: a) IGV has moved above its 100-day SMA b) IGV appears to be breaking out from a head and shoulders bottom formation c) if IGV closes at current levels it would be the highest close since January 29th (and keep in mind this ETF is up 2% in a down market). I understand there have been some "false starts" on the potential rebound in the software space, but there has been some technical healing here over the past month and the price action is incrementally bullish. Of course, if the IGV were to fall back below the 100-day SMA, then this could be sending a "false breakout" signal.

Near-term technical translation: Bullish

The Bitwise 10 Large Crypto Index is down 1% week over week, with bitcoin down 2% and ether down 4% at the time of writing this on Friday.  During the early days of crypto, a popular narrative was that blockchain ecosystems would drive the next phase of the internet, often referred to as Web3. This narrative appeared to peak in the summer of 2021 during "DeFi Summer," when non-fungible tokens (NFTs) exploded in popularity, driving a surge in the value of digital images before prices fell as the broader market entered a crypto winter.

Since then, most applications that have sustained usage have been financial in nature, leading many industry participants to view blockchain as an upgrade to the financial system rather than the next phase of the internet. It is true that many of the largest projects in crypto are financial. At the same time, each bear market creates space for innovation. Many digital asset ventures are still focused on payments, trading, lending, custody, and asset management, even as market share leaders have already emerged. This suggests there may still be areas of improvement for blockchain technologies outside purely financial use cases.

As of December 31, 2025, there are millions of cryptocurrencies, though only 10,000 to 16,000 are considered active. In comparison, there are roughly 180 traditional currencies globally. The IMF tracks 68 global commodities, which is also small relative to the number of cryptocurrencies.

Revisiting the Web3 concept raises an important question: what if cryptocurrencies have less in common with currencies and more in common with websites? Prior to the internet, a business established its identity through advertising its services. The internet changed that, with many businesses establishing their identity through a website. Today, a core requirement for most businesses is a customer-facing website rather than an internal intranet. In this context, tokens may have more in common with websites than with currencies. If a website represents a business in the post-internet economy, a token may represent a business in a tokenized economy.

Data from Semrush indicates that Google.com had nearly 100 million visits in 2025, followed by nearly 50 million to YouTube, 9 million to Facebook, and about 5 million each to ChatGPT and Instagram. Data from HubSpot suggests that almost 50 percent of websites receive fewer than 180,000 visits per year, indicating that value accrues to a small subset of sites. If the value of a website is driven by traffic, this suggests that a small number of websites have captured majority of the value. A similar dynamic appears in crypto markets. "Where Might Value Accrue in the Crypto Market" shows that value has historically accrued to foundational networks and user-facing products, while infrastructure captures less value. More broadly, most of the value in crypto has concentrated in the top ten assets.

Another similarity is that both ecosystems are characterized by constant creation. Each year brings new websites, with roughly 250,000 created per day. As of October 2025, there are about 1.4 billion websites, though only 16 percent are active. Crypto follows a similar pattern. New tokens launch regularly, and one defining feature is that they rarely disappear. Instead, they become inactive or never gain usage to begin with. While historical data is limited, the parallel growth patterns of websites and cryptocurrencies support the idea that crypto assets may share more characteristics with websites than with currencies or commodities.

The Bloomberg chart below shows the current % of members within the S&P 500 (SPX), Nasdaq Composite (CCMP) & Russell 2000 (RTY) that are trading above their respective 200-day Simple Moving Averages (SMA). In short, the S&P 500 and Nasdaq both notched fresh all-time highs this week, but market breadth deteriorated. This continues to suggest relatively narrow market leadership. Compared to last Friday, the SPX (white line) breadth declined to 55.40% from 56.80%, the CCMP (blue line) eased to 43.47% vs. 45.14%, while the RUT (red line) saw the largest drop, falling to 58.74% from 62.65% (all week-over-week).

Market breadth attempts to capture individual stock participation within an overall index, which can help convey underlying strength or weakness of a move or trend. Typically, broader participation suggests healthy investor sentiment and supportive technicals. There are many data points to help convey market breadth, such as advancing vs. declining issues, % of stocks within an index that are above or below a longer-term moving average or new highs vs. new lows.

This Week's Notable 52-week Highs (16 today): Apple Inc. (AAPL - $0.44 to $297.77), Biogen Inc. (BIIB + $1.74 to $193.11), Cisco Systems Inc. (CSCO + $2.00 to $117.53), eBay Inc.  (EBAY + $0.64 to $113.88), Micron Technology Inc. (MU - $44.01 to $732.00), Palo Alto Networks Inc. (PANW - $3.71 to $234.50)

This Week's Notable 52-week Lows (80 today): Accenture PLC (ACN + $1.98 to $165.97), Best Buy Co. (BBY - $0.26 to $56.42), Builders FirstSource (BLDR - $3.03 to $70.55), Charter Communications Inc. (CHTR - $6.28 to $141.71), Home Depot Inc. (HD - $4.84 to $299.51), International Business Machines Inc. (IBM + $1.06 to $219.43)