by Michael P. Reinking, CFA - Sr. Market Strategist

Published on 5/28/26 (a/o 2:00 pm)

Yesterday we saw the latest example of the fog of uncertainty that surrounds this conflict when Iran state media said they obtained the draft Memorandum of Understanding, followed by the White House saying it was a “complete fabrication”.  Oil prices moved lower on the initial headlines and despite the rebuttal never really bounced back. Major US indices all ended the session around unchanged. Consumer sectors moved higher, while Energy and Financials were the main underperformers. Tech also pulled back modestly with Zscaler’s 30% decline pulling down cybersecurity names.    

Today is kind of a replay of the fog just in reverse. Overnight the US and Iran exchanged some fire but US officials continued to say that the ceasefire was still in place. Futures were modestly lower overnight but improved after an economic data dump this morning which included PCE, that was slightly better than feared, helping rates pull back slightly. Shortly after the open Axios reported that an agreement had been reached on a 60-day MOU to extend the ceasefire and begin nuclear negotiations. The story said President Trump asked for a couple of days to “think about it” while Iran’s Supreme leader refuted accepting the terms which included the “unrestricted” opening of the Strait. Equities have rallied on the headlines while oil prices have reversed the overnight bounce and are testing yesterday’s lows again. As we head to print, the S&P 500 and Russell 2k are up just over 0.5%. Tech is outperforming with the NYSE 100 up >1%. The Dow Jones Industrial Average is hovering around unchanged.

Ahead of the open a ton of economic data was dropped. Personal spending was inline with expectations up 0.5% however, income was flat m/m below estimates and down from the 0.5% increase last month. This is yet another data point highlighting that the consumer particularly at the low end of the income scale could be running on borrowed time (pun intended). Weekly claims data was largely inline and along trend. Durable goods orders were exceptionally strong, with aircraft orders jumping 165%. However, when stripping out defense and aircraft, orders fell 1.1% - a rare decline in that metric over the past two years (see below), which is often viewed as a proxy for business spending. The second estimate for GDP was revised lower, from 2.0% to 1.6%, with a downward revision to consumer spending (services lower, offsetting higher goods) and investment (inventories). Which takes us to the main event PCE. Headline and core PCE rose 0.2% and 0.4% m.m, respectively, slightly below consensus and last month. The annual readings were spot on with expectations up 3.8% and 3.3% respectively, but up from last month, highlighting the lingering inflation issue for markets and the Fed.

Treasury yields were moving modestly higher overnight but have reversed that move and are now down a couple of basis points coming in two waves of buying after the economic data and in response to the Iran headlines. The USD index is also moving slightly lower.

Overnight markets in Asia were modestly lower with tech stocks hitting the pause button. Japan was down ~0.5% with Softbank and Advantest falling 2-3% and the yen was little changed overnight but has been strengthening modestly during the US trading session. Around 30 large Japanese companies across industries are looking into investing in a new Softbank Industrial AI venture that would build domestic AI. China’s markets were mixed with the Hong Kong Hang Seng falling >1%. The EU will broaden its use of trade defenses against China to protect against the “existential” threat of Chinese imports to the region according to the FT. ByteDance is reportedly developing its own CPUs and may double its capex on infrastructure build out.  European indices closed modestly lower but off the worst levels. Financials were down and luxury names are giving back yesterday’s gains. 

Oil prices had bounced overnight but have been moving lower throughout the session. ICE Brent is down slightly trading just under yesterday’s low. Technically it broke below the 50d on Monday and has yet to be able to reclaim that level. The April lows and the 100d ma are ~$85 down about 10% from current levels.

Yesterday the metals complex was very weak despite the move lower in oil breaking with some of the more recent correlations. That weakness continued overnight with Gold trading down to tag its 200d just under 4,400 but has reversed sharply now up just over 1% at ~4,500.

Ag is under pressure. Crypto has been drifting lower over the last couple of weeks after Bitcoin failed at its 200d ma. It broke below its 50d ma yesterday and accelerated to the downside trading down to 72.5k overnight. Despite President Trump continuing to bang the drum in support of industry the odds of this passing have continued to worsen. Yesterday TD lowered its odds of passage to 40%. Polymarket odds have also been moving lower down to ~56% from just over 70% after moving through the Senate Banking Committee. Part of that move lower may also be related to an OTC trade done in this market by crypto fund Arca, to hedge their portfolio, with Galaxy Digital acting as the counterparty.  

Major indices are hitting new all-time highs but the only sectors in the S&P 500 that have meaningful gains are technology and healthcare which are both up >1%. There were a bunch of earnings and announcements within the tech sector. Software is leading up 3% while semis are also adding to recent gains. See bullets below:

Healthcare is up >1% with pretty broad-based strength. Eli Lilly (>+3%), the sector’s mega-cap, secured coverage for weight loss drugs from the three largest PBMs.  Agilent (+>15%) earnings are helping the life science technology stocks.

Retail earnings were also busy and the numbers pretty much across the board were pretty solid with most of the stocks trading sharply higher  (BBY/KSS/DLTR all up >10%). Consumer discretionary is trading a touch higher. Consumer staples are underperforming as Walmart and Costco remain under pressure, the latter reports after the close.

On the downside financials continue to underperform with pretty broad-based weakness across banks, insurers and exchanges.  Utilities are also down ~0.5%. Energy is holding up despite the commodity weakness with refiners outperforming.

Tomorrow is month end and the MSCI rebalance so expect some elevated volumes. Other than earnings the calendar is a little lighter. The US economic data includes trade balance, inventories and Chicago PMI. Overnight Eurozone and Japan inflation data could get some attention. 

Pre-Market: BBY, BURL, DLTR, HRL, KSS, PLAB, REX

After-Market: ADSK, AEO, COST, DELL, GAP, HQY, MDB, NTAP, OKTA, PATH, S

US:

Global: