STRAIGHT FROM THE TRADING FLOOR
by Michael P. Reinking, CFA - Sr. Market Strategist
Published on 5/15/26 (a/o 9:00 am)
Happy Friday,
Yesterday markets extended to the upside with the S&P 500 closing up nearly 1% at a new all-time high clearing 7,500. The Dow Jones Industrial Average was up a similar amount, closing back above 50k for the first time since February. Positive vibes coming out of the China summit, strong tech earnings, a positive retail sales report and the Clarity Act clearing a procedural hurdle all helped sentiment. As compared to the rest of the week the breadth, improved with consumer facing companies, financials and industrials joining the party. Some of the upside convexity may have been related to all of the recent upside call buying, as we approached today’s options expiration. Oil prices and yields were tame but continued to hold just under recent highs (can you sense the foreshadowing?).
Coming into today’s session the S&P 500 was up 1.4% WTD, looking to extend its winning streak to 7 consecutive weeks. However, as mentioned above the breadth has been poor with the equal weight version of the index and the small and midcap indices all down on the week. The winning streak is in jeopardy as futures have come under significant pressure throughout the overnight session with S&P 500 and R2K futures both down >1%. There isn’t a particular headline to point to for the weakness but rather a mix concerns causing the downdraft including the unsustainable nature of the recent rally particularly within the tech sector.
From my perspective the biggest driver of the weakness is stemming from a sharp move higher in global yields overnight after a hot Japan PPI print, the continued move higher in oil prices and the ongoing political situation in the UK. A case of “Gradually, then suddenly”, to quote Hemingway. Yields in Japan are up 2-9bps across the curve. Yields in Europe are also up sharply with Germany up ~8bps but yields in the periphery up 10-20bps. UK Gilts are also up ~15bps. This is pulling US Treasury yields up as well and they are starting to decisively push through recent highs with the 2yr pushing through 4%, the 10yr through 4.5% and the 30yr through 5%. After breaking back above its 200d yesterday the USD index s also moving up ~0.5%.
Government Yields
In regard to the China Summit there is some disappointment with the lack of new commitments. As this is now in the rear-view markets traders are also concerned that the administration could refocus its attention on Iran with the potential for military action to restart. There is also a view that since a couple of China oil tankers made their way through the Strait that there is less of a reason from President Xi to push for a resolution, though I don’t necessarily agree with this take. Oil prices are pushing back to the highs for the week up >2% with ICE Brent trading just over $108.
This morning Empire Manufacturing, which is our first look at May data, came in strong with improvement in new orders while employment measures were mixed. However, the was also a sharp increase in prices paid/received adding to the inflation concerns. Just ahead of the open industrial production will be released.
It was an ugly overnight session. South Korea, the epicenter of the recent tech strength, fell 6% wiping out the week’s gains ending around unchanged WTD. The newest board member of the Bank of Korea warned of financial stability risks and inflation. Japan was down ~2% with a BOJ board member calling for a rate hike as soon as possible. The Yen has been weakening again reversing much of the intervention related strength back ~158.50¥/$. Major indices in China/Hong Kong were down between 1% - 2%. Most major indices in Europe are down ~2%. There is broad-based weakness but miners are getting hit particularly hard down >5% as the commodity complex is under pressure with the USD rally.
As mentioned above energy is moving higher. Metals are getting slammed with gold down ~3%, copper off ~5% and silver nearly 10%. Ag is also down >1%. Wheat is still up on the week but both corn and soy are off >2%. The risk off sentiment is weighing on the crypto complex which is giving back some of yesterday’s “Clarity” related rally. Bitcoin is pulling back to ~80k after tagging its 200d again (~82k) yesterday.
It was a quieter evening of earnings. Tech remained in focus. Software company Figma is trading up >5% after a beat and raise quarter. In the semi complex had solid results but the stock is down ~2% given the sky-high expectations.
Earnings:
After-Market: AMAT, FIG, HUBG, NN, YSS
Economic Data:
US:
Yesterday markets extended to the upside with the S&P 500 closing up nearly 1% at a new all-time high clearing 7,500. The Dow Jones Industrial Average was up a similar amount, closing back above 50k for the first time since February. Positive vibes coming out of the China summit, strong tech earnings, a positive retail sales report and the Clarity Act clearing a procedural hurdle all helped sentiment. As compared to the rest of the week the breadth, improved with consumer facing companies, financials and industrials joining the party. Some of the upside convexity may have been related to all of the recent upside call buying, as we approached today’s options expiration. Oil prices and yields were tame but continued to hold just under recent highs (can you sense the foreshadowing?).
Coming into today’s session the S&P 500 was up 1.4% WTD, looking to extend its winning streak to 7 consecutive weeks. However, as mentioned above the breadth has been poor with the equal weight version of the index and the small and midcap indices all down on the week. The winning streak is in jeopardy as futures have come under significant pressure throughout the overnight session with S&P 500 and R2K futures both down >1%. There isn’t a particular headline to point to for the weakness but rather a mix concerns causing the downdraft including the unsustainable nature of the recent rally particularly within the tech sector.
From my perspective the biggest driver of the weakness is stemming from a sharp move higher in global yields overnight after a hot Japan PPI print, the continued move higher in oil prices and the ongoing political situation in the UK. A case of “Gradually, then suddenly”, to quote Hemingway. Yields in Japan are up 2-9bps across the curve. Yields in Europe are also up sharply with Germany up ~8bps but yields in the periphery up 10-20bps. UK Gilts are also up ~15bps. This is pulling US Treasury yields up as well and they are starting to decisively push through recent highs with the 2yr pushing through 4%, the 10yr through 4.5% and the 30yr through 5%. After breaking back above its 200d yesterday the USD index s also moving up ~0.5%.
Government Yields
- US 2yr +3bps to 4.06%, 5yr +6bps to 4.22%, 10yr +7bps to 4.56%, 30yr +7bps to 5.10%
- USD index: +$0.38 to $99.11
In regard to the China Summit there is some disappointment with the lack of new commitments. As this is now in the rear-view markets traders are also concerned that the administration could refocus its attention on Iran with the potential for military action to restart. There is also a view that since a couple of China oil tankers made their way through the Strait that there is less of a reason from President Xi to push for a resolution, though I don’t necessarily agree with this take. Oil prices are pushing back to the highs for the week up >2% with ICE Brent trading just over $108.
This morning Empire Manufacturing, which is our first look at May data, came in strong with improvement in new orders while employment measures were mixed. However, the was also a sharp increase in prices paid/received adding to the inflation concerns. Just ahead of the open industrial production will be released.
It was an ugly overnight session. South Korea, the epicenter of the recent tech strength, fell 6% wiping out the week’s gains ending around unchanged WTD. The newest board member of the Bank of Korea warned of financial stability risks and inflation. Japan was down ~2% with a BOJ board member calling for a rate hike as soon as possible. The Yen has been weakening again reversing much of the intervention related strength back ~158.50¥/$. Major indices in China/Hong Kong were down between 1% - 2%. Most major indices in Europe are down ~2%. There is broad-based weakness but miners are getting hit particularly hard down >5% as the commodity complex is under pressure with the USD rally.
As mentioned above energy is moving higher. Metals are getting slammed with gold down ~3%, copper off ~5% and silver nearly 10%. Ag is also down >1%. Wheat is still up on the week but both corn and soy are off >2%. The risk off sentiment is weighing on the crypto complex which is giving back some of yesterday’s “Clarity” related rally. Bitcoin is pulling back to ~80k after tagging its 200d again (~82k) yesterday.
It was a quieter evening of earnings. Tech remained in focus. Software company Figma is trading up >5% after a beat and raise quarter. In the semi complex had solid results but the stock is down ~2% given the sky-high expectations.
Earnings:
After-Market: AMAT, FIG, HUBG, NN, YSS
Economic Data:
US:
- Empire manufacturing: vs. 7.5 cons., prior 11
- 9:15 Industrial Production
- 9:15 Capacity Utilization
- 12:00 NOPA Crush
- 1:00 Rig Count
- Japan PPI: 2.3%/4.9% m.m/y.y 0.7%/3% cons., prior 1.0%/2.9%
- India Balance of Trade: -$28.3B vs. -$27B cons., -$20.6B
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