May 18th Market Overview

Happy Tuesday

Three straight days of light(ish) selling now. Bank of America's fund manager survey triggered a sell signal today as cash allocations hit extreme lows. I think the next 24 hours, with Nvidia earnings and the Fed minutes, will tell us whether this is a breather or something worse.

Let’s dig in...

Today's Big Picture

1. Bonds Sold Off Again and Mortgage Rates Felt It

The 30-year Treasury yield closed at 5.19, highest since 2007. The 10-year at 4.66, highest close since January 2025. You can already see it in housing. The 30-year fixed mortgage rate hit 6.75, its highest since last July, and homebuilder stocks fell across the board.

2. BofA Fund Manager Survey Tripped a Sell Signal

Portfolio cash levels dropped to 3.9 from 4.3 in Bank of America's monthly survey. Below 4 is their sell signal. For context, the median loss after this signal fires has been about one percent across 24 instances going back to 2011. Momentum strategies also posted their worst two-day stretch since 2022.

3. Chip Positioning Is Split Ahead of Nvidia

Large speculators in Nasdaq futures flipped to their biggest net short position since 2023, according to Wolfe Research. Seaport said several chip stocks have gotten ahead of their fundamentals despite real AI demand underneath. Micron reversed today and closed higher after three straight down days. Nvidia reports tomorrow and the setup has big money leaning both ways.

Market Overview

Index Performance

Stock Spotlight

Nvidia $NVDA ( ▼ 0.52% )  
reports tomorrow. HSBC raised its target to $325 from $295 today. CEO Huang said last week that AI demand has climbed meaningfully and it will be hard to keep up with buildout for a decade. Memory demand is outpacing capacity.

Berkshire Hathaway $BRK.B ( ▼ 1.61% )  
took a $2.6 billion stake in Delta Air Lines $DAL during Q1. Greg Abel is running the show now and apparently doesn't share Buffett's famous distaste for airlines.

Home Depot $HD ( ▲ 0.88% )  
finished the day higher after its morning earnings beat. Morgan Stanley called the risk-reward still favorable. Wolfe Research said "better than feared" and that results give confidence to the broader retail group reporting this week.

Big Name Updates

Dell $DELL ( ▼ 0.94% )  
got a target raise from Evercore to $270 from $240. Dell World kicked off in Vegas today with Jensen Huang as a guest speaker, positioning Dell's AI Factory as the enterprise infrastructure play for production-scale AI.

Spotify $SPOT ( ▼ 0.97% )  
reiterated at Overweight by Barclays with a $500 target. The analyst's point: Spotify needs to own its AI monetization narrative before the market writes one for them. Right now the AI story around music shifts with every headline.

Analog Devices $ADI ( ▼ 0.72% )  
reiterated at Outperform by Evercore with a $387 target ahead of earnings tomorrow. Their checks show improving cyclical signals and price hikes on legacy products.

American Tower $AMT ( ▲ 3.15% )  
upgraded to Outperform by Bernstein with a $207 target. They argue satellite risk is overstated and that any direct-to-device satellite plan would still need terrestrial towers or an MVNO partner to actually compete.

Other Notable Company News

Boeing $BA ( ▼ 2.83% )  
partnered with Gilat to offer in-flight broadband installed during aircraft manufacturing instead of costly after-the-fact retrofits.$

Stellantis $STLA ( ▼ 0.41% )  
will start producing affordable EVs at its Italian plant in 2028 to go after the lower end of the European market.

StubHub $STUB ( ▲ 1.39% )  
upgraded to Buy by Guggenheim with a $12.50 target. World Cup tailwinds and rock-bottom expectations on new revenue lines.

Standard Chartered (Large English/India bank… not traded on US markets)
Cutting nearly 8,000 back-office jobs. CEO Bill Winters said the bank is replacing "lower-value human capital" with technology. The stock has nearly tripled since the start of 2024.

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Sector Watch

Bond Market

The global bond selloff is getting harder to ignore.

• Homebuilders took a hit as mortgage rates rose. D.R. Horton, Lennar, and Toll Brothers all fell on the session.
  

• Almost two-thirds of fund managers surveyed by Bank of America think the 30-year Treasury yield could top 6 within the next year. Only 20 percent think it drops back below 4.

Pending home sales actually rose in April, with the NAR index up to 74.8. But their chief economist added the obvious caveat: demand would be a lot higher if mortgage rates came back down. No kidding.

Policy Watch

Fed

Kevin Warsh gets sworn in as Fed Chair on Friday. The April meeting minutes drop tomorrow at 2 PM ET, which was Jerome Powell's final meeting as chair.

• Some analysts think the bond market is testing Warsh before he even starts

• A Reuters poll shows most economists expect no rate cuts this year

• Futures markets are now pricing a possible hike by January

Iran and Energy

Trump paused the strike yesterday but the U.S. seized an Iran-linked oil tanker in the Indian Ocean overnight. Mixed signals.

• Treasury Secretary Scott Bessent issued another temporary 30-day license letting countries import Russian oil without sanctions risk. This is the second time they've extended that waiver, trying to cool prices from the supply side.

• WTI settled at $107.77 and Brent at $111.28. Still elevated. Brent is up more than 20 percent over the past month.

International

The United Nations cut its 2026 global growth forecast to 2.5 from 2.7 in January, citing the Middle East conflict and higher energy costs. That would be the weakest global expansion since 2020. They left the U.S. forecast unchanged at 2, noting AI investment as support.

• Indonesia plans to tighten state control over commodity exports, which matters most for nickel

• Canada inflation came in at 2.8 in April, driven mainly by gasoline

What to Watch

The AI company quietly automating every Walmart distribution center already has 23 billion in orders on the book

It's just one of seven names in this free MarketBeat report.

Nvidia Earnings (Wednesday)

The most important report of the season. Guidance will matter more than the quarter. Every AI narrative runs through this print.

Fed April Minutes (Wednesday, 2 PM ET)

Powell's last meeting as chair. I want to see how the committee was framing inflation before oil ran and before the Iran situation escalated.

Samsung Workers Strike (Thursday)

Unionized Samsung employees in South Korea plan to walk off the job. Memory supply is already tight and any disruption adds pressure to an already stretched market.

Thanks for reading - you are now the more informed 🙂

- John

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