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

Published on 5/19/26 (a/o 1:00 pm)

DOW 49,540 (-146), S&P 500 7,385 (-18), Russell 2000 2,752 (-23), NYSE FANG+ 17,091 (-15), ICE Brent Crude $110.86/barrel (-$1.24), Gold $4,511/oz (-$47), Bitcoin ~76.8k (-207)

The rotation we saw Friday out of momentum and AI infrastructure names continued yesterday. While that took Tech and parts of the Industrial sectors lower, the rest of the equity market performed relatively well as the S&P equal-weight rose 0.6%. Rotational flows and mean-reversion were also apparent in REITs, financials and software which have underperformed. There was a rally late in the day after President Trump said he was postponing a US attack on Iran at the request of Middle East leaders due to “serious negotiations”.  The S&P 500 recouped much of its intraday losses to close only slightly lower while the Russell 2000 lagged, falling 0.7%. Yields were relatively tame after surging on Friday.

S&P futures drifted lower overnight giving back about half of the late day rally as the Iran situation remained murky at best with President Trump saying the pause was only temporary. However, shortly before the open Treasury yields started to move sharply higher again and equities extended to the downside. That being said the pullback, at least at the index level, has been pretty orderly with the VIX hovering ~18. Early on there was a continued rotation out of crowded tech and other momentum stocks but the buy the dip crowd is starting to emerge. Defensive sectors are outperforming with healthcare leading the way. Major indices have bounced off the lows with the S&P down ~0.25%. Small and mid-cap indices are underperforming slightly down ~0.5%, given the relative exposure to rising interest rates. 

It was another reasonably quiet morning of economic data. The weekly ADP employment change increased to 42,250 from 33k two weeks ago, hitting its highest level since the data set started to be tracked earlier this year. After the open pending home sales came in slightly better than estimates but remain a depressed level. G7 finance ministers met for the second day in Paris discussing the impact of Iran, bond volatility and economic imbalances though there hasn’t been any notable action. Global yields have continued to move higher with yields in the US up >5bps across the curve. 

Global markets were mixed overnight. Chinese equities ended higher, with tech names mostly bucking the weakness in US peers. President Xi is following up his meeting with Trump last week with a two-day summit with Russian President Putin and there has been speculation of more stimulus following the weak economic data. South Korea’s KOSPI fell 3% with tech weak (SK Hynix fell 5%). In Japan the Nikkei slipped 0.4% despite better-than-expected Q1 GDP. Banks were an outperformer and Mitsubishi Financial hit an all-time high. European indices traded higher overnight but faded in the back half of the session to end with modest gains. In the UK, unemployment increased 0.1% from last month to 5%, while private sector wages hit their lowest since 2020. That is calling into question the need for the BOE to hike rates to combat energy shocks, but local yields are up ~5bps. According to reports Lloyds Banking Group is preparing to invest in US infrastructure , including data centers. 

Oil prices are a touch lower than where they were when futures closed yesterday, but well off the lows following the Trump post. The Treasury extended the Russian oil sanction waiver for 30 more days. The move in the USD and rates continues to weigh on the metals complex with prices across base/precious metals down between 1% -4%. Crypto remains stuck in the mud trading modestly lower. Iran is reportedly planning to enter the shipping insurance space, developing a program to offer coverage for cargos transiting the Strait, paid in Bitcoin.

Despite markets trading lower the breadth within the S&P 500 wasn’t terrible and has been improving. Defensive sectors like staples and healthcare are outperforming. As are the yield-oriented sectors REITs/Utilities which are both up ~1%.

Tech heavy sectors were underperforming as are companies exposed to AI infrastructure traded down earlier but we have finally started to see some dip buyers emerge with sharp reversals in semis/memory stocks. Info tech has rallied all the way back to unchanged. Google and Blackstone launched a JV that will offer data center capacity that utilizes Google’s TPU AI chips. This creates a new competitive entrant to the NVDA-based offerings and is weighing on the neo-data center stocks (CRWV/NBIS/IREN/APLD).

Home Depot was the first major retailer of the week to report, beating consensus estimates and reaffirming guidance. CEO Ted Decker noted underlying demand remained relatively unchanged despite greater consumer uncertainty and affordability pressure. Consumer discretionary is down >1% with weakness in the mega-caps (AMZN/TSLA ->1.5%), housing related and cruise ship operators.  

Materials is the worst performing sector with pretty broad-based weakness across miners, packaging and chemical companies. On a related note, construction materials supplier Eagle Materials is trading modestly higher after beating estimates. Cement and aggregate sales were strong, driven by public construction and private non-residential projects. Gypsum and light materials were lower on soft residential construction activity. 

Tonight’s Eastern Conference Finals will set the tone for tomorrow, but the Knicks have a tough act to follow after last night’s instant classic in the Western Conference. Tomorrow the focus will be on retail earnings with a handful of reports ahead of the open and then Nvidia earnings after the close.

After-Market: CAVA, KEYS, TOL, XP

Pre-Market (Wed): ADI, HAS, LOW, TGT, TJX, VFC

After-Market:  ELF, ENS, INTU, NDSN, NVDA, URBN

US:

Global: