May 27th Pre-Market

Good Morning

Two chipmakers worth a trillion. Oil falling off a cliff after Iran said the Strait reopens in a month. Goldman raising targets like it's their job (it kinda is).

Feels like everything is breaking the right way. And yet bond yields sitting at 2007 highs…. wondering what the bond market sees that stocks don't.

Let's dig in...

Today's Big Picture

1. Two Chipmakers Hit $1 Trillion And The Trade Keeps Getting Narrower Micron 

$MU doubled to $1 trillion in 48 days. Nvidia took 490 days for refrence. SK Hynix hit the same mark hours later, putting all three memory makers at trillion-dollar valuations with production sold out through 2026. UBS says Micron could double again, but one demand miss and the three most crowded trades on the Street unwind together.

2. Iran Says It Will Restore Strait Traffic Within A Month 

Iran's state TV reported a draft deal to restore Strait of Hormuz traffic to pre-war levels within a month. WTI dropped below $89 on the headline. The Strait is running at a tenth of normal volume right now and almost no crude is moving. Even with a signed deal, clearing the backlog takes months and Iran is still pushing for a permanent toll on ships passing through.

3. Goldman Raises To 8,000 While The Bond Market Says Otherwise 

Goldman raised the year-end S&P target to 8,000 on AI earnings. The entire index return this year is profit growth with zero multiple expansion. That's fine until earnings slow down because there's nothing underneath. ECB warned about correction risk this morning. 30-year yields at 2007 highs. No cuts priced until summer 2027.

Market Overview

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Stock Spotlight (pre-market)

Zscaler $ZS ( ▲ 1.22% )  
Revenue guide came in just under the Street. Didn't matter that earnings and revenue beat. When a growth name misses on guidance the stock gets punished, period. Palo Alto $PANW and CrowdStrike $CRWD both down in sympathy.

Lululemon $LULU ( ▲ 0.13% )  
Proxy fight with founder Chip Wilson is done. Two of his board nominees get seats, including former On $ONON co-CEO Marc Maurer. Incoming CEO Heidi O'Neill now has a clean runway.

Bath & Body Works $BBWI ( ▼ 0.17% )  
Current-quarter guidance came in above estimates. Earnings and revenue beat too. Retail names with clean guidance are getting rewarded right now.

Abercrombie & Fitch $ANF ( ▼ 3.21% )  
Earnings beat was comfortable but revenue missed and forward guidance disappointed. Longs have to decide if this is a sell-the-pop setup or if the brand carries it through a soft quarter.

Semtech $SMTC ( ▲ 4.9% )  
Beat across the board on earnings, revenue, and guidance. AI semiconductor demand is driving the numbers and the company is actually converting it to results.

MGM Resorts $MGM ( ▲ 0.13% )  
JPMorgan upgraded to overweight. Leisure travel demand in Vegas is holding up and the valuation got cheap enough for the call. Portfolio managers underweight gaming are looking at this with a fresh JPM stamp on it.

What to Watch

Salesforce and Marvell Earnings (After Bell) Salesforce 
$CRM is down 32 on the year. The entire SaaS recovery rides on tonight's print. Marvell $MRVL has doubled this year. Watch the data center revenue line for a read on AI demand beyond chips.

PCE Inflation (Thursday) 
This is the week's real event. Hot print pushes the rate hike conversation forward. Cool print and bonds finally catch a bid.

Fed Speakers 
Cook and Jefferson today. Listen for whether anyone references oil in their inflation outlook. If they do, tighter policy is coming faster than expected.

- John

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