May 26th Pre-Market

Good Morning

Nothing like coming back from a long weekend to overnight airstrikes and green futures. This market…. I think everyone got a little too comfortable over the weekend assuming a deal is done.

Packed week ahead.

Let's dig in...

Today's Big Picture

1. Both Sides Are Shooting And Negotiating At The Same Time 

The U.S. sank two IRGC boats and hit missile sites near the Strait. Iran fired back at a U.S. F-35 then quietly delayed announcing its own casualties to avoid blowing up the talks. Prediction Markets are pricing an 81 percent chance of a deal by June 30 and Fars reports frozen funds are the last sticking point being resolved through Qatar.

2. Oil Below $100 Feels Good But The Futures Curve Isn't Buying It

Brent near $96 but December contracts sit around $83, a year out near $76. For context Brent started this year at $61. UBS says global inventories dropped 246 million barrels in March and April with production losses on pace to hit 1 billion barrels by end of May. Even a best-case deal takes months to unwind that kind of deficit.

3. Stocks Near Record Highs But The Bond Market Flipped 

The AI trade is carrying indices back toward all-time highs and Q1 earnings came in at the strongest pace since late 2021. Meanwhile bond traders went from pricing rate cuts to pricing rate hikes in about a month. That's a real divergence and one of these markets is wrong. Thursday's inflation and GDP data will tell us which one.

Market Overview

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Stock Spotlight (pre-market)

Ferrari $RACE ( ▼ 0.33% )  
Unveiled the Luce, its first EV, at $640,000 designed with Jony Ive's LoveFrom studio. Fans hated the design and the stock had already run into the launch. Down in premarket.

BP $BP ( ▼ 1.14% )  
Board removed Chairman Manifold immediately over conduct issues. No warning. Leadership vacuum at a major energy company in the middle of the most important oil market in years.

Micron Technology $MU ( ▼ 1.46% )  
UBS tripled their price target from $535 to $1,625 and says DRAM stays undersupplied until mid-2028. Leading chips higher in premarket with Qualcomm $QCOM and AMD $AMD moving with it.

Dell Technologies $DELL ( ▲ 16.77% )  
Building on Friday's big move ahead of Thursday's earnings. AI server demand is the story and analysts expect a beat.

Intuitive Machines $LUNR ( ▲ 11.74% )  
Space stocks repricing off SpaceX's IPO filing. The company reaffirmed guidance and expects a Lunar Terrain Vehicle contract decision this week.

Marvell Technology $MRVL ( ▲ 2.96% )  
HSBC upgraded to Buy and raised their price target from $85 to $300. Reports Wednesday with the entire chip complex running into the print.

What to Watch

IPO’s

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Consumer Confidence (10 AM ET) 

Skip the headline. The inflation expectations reading inside this report is what matters. If consumers see prices accelerating, Warsh inherits a credibility problem before his first meeting.

PCE And GDP Land Together Thursday 

This is the week's real event. Bank of America forecasts 0.4 month over month on core PCE with headline running 3.8 on the year. If both come in hot alongside firm GDP, the rate hike conversation shifts from "maybe December" to "maybe sooner."

Fed Speakers All Week 

Cook, Jefferson, Williams, and Bowman all speak between Wednesday and Friday. Listen for whether anyone references oil directly in their inflation outlook. If they do, tighter policy is coming faster than the tape thinks.

- John

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