MARKET WRAP

The first down day for the SPX in the past 7 sessions, but there was some buying into the close that prevented it from being worse. On the day: SPX -0.4%, QQQ -0.4% and IWM +0.1%.

Keep an on on the 10Y yield as it crept higher today, now 4.49%. Also worth watching is if the VIX holds or goes higher into tomorrows VIX expiry and the upcoming three day weekend (more on that below). Gold was higher today, and DXY lower, now back to the important $100 level. On the earnings front HD saw an initial pop this morning that completely faded by the end of the day. More box store retailers report tomorrow morning.

After hours: Palo Alto (PANW) is lower by about 4% following earnings.

• MRKT Call: Guy and Dan take stock of the rally, US Debt / Treasuries, Japan, China, retailers, MSFT vs GOOGL AI and more.

• RiskReversal Pod: Dan interviews internet analyst Brad Erickson, and software analyst Matt Hedberg of RBC Capital Markets from the RBC Capital Private Tech Conference.

MRKT MATRIX: TODAY’S TOP STORIES

• Dow slides more than 100 points, S&P 500 snaps six-day winning run ⁠(CNBC)⁠

• JPMorgan CEO Jamie Dimon says markets are too complacent on tariffs, expects S&P 500 earnings growth to collapse (⁠⁠CNBC⁠⁠)

• KKR Says Bonds’ Role as Portfolio ‘Shock Absorbers’ Is Eroding (⁠⁠Bloomberg⁠⁠)

• Citi Sees Weaker Dollar After G-7 Meeting as US Softens Tariffs (⁠⁠Bloomberg⁠⁠)

• China smartphone exports to US, including Apple’s iPhone, dive to lowest since 2011 ⁠(SCMP)⁠

• Home Depot Plans to Keep Prices Steady Despite Tariffs (⁠WSJ⁠)

• Target’s looming earnings report will show tariff pressure, Wall Street says ⁠(CNBC)⁠

• The AI Hiring Pause Is Officially Here (⁠⁠Bloomberg⁠⁠)

• Musk Commits to Tesla CEO Role and Plans Political Pullback ⁠(Bloomberg)⁠

WHAT’S NEXT?

Did the VIX just bottom?

The short answer is maybe? But it may not be clear until after we get through the upcoming three day weekend. In a nutshell, after falling as low as 17 recently—its lowest level in months—the VIX has begun to perk up over the past two sessions, despite not much of a pullback in stock prices. It’s a potential shift in market tone mainly in that it has stopped its decline, but it also follows a very large option expiry this past Friday, with a large VIX expiry tomorrow. Those two events close together can sometimes mark an end to a recent market trend. That’s because the market backdrop in options and volatility instruments are often supportive of that trend into expiry, and then gone after. 

As we saw most of the past week and a half, small dips have reliably attracted buyers—fueled in part by positive gamma dynamics (and a persistent late day short-covering bid). But should the VIX push back above the 20 level, even on relatively minor stock declines (or even rallies), it could change some of that dynamic. It could prompt renewed hedging activity, especially from participants who have gone under-hedged on the last bit of this rally. That, in turn, could tilt the balance—from a reliable bid to one that’s slightly more uncertain.

For now, the tape remains resilient, with buyers stepping in quickly on weakness. But should the subtle rise in implied volatility survive the upcoming three day weekend (vol tends to trend lower into long weekends), recent complacency may shift. It’s a potential development worth noting should we see the VIX back above 20 soon, a small reminder to investors of the volatile period we just emerged from.

• Wednesday May 21st

  • All Day - G7 Meeting

  • Pre-market: BIDU 5.2%, TGT 8.5%, TJX 4%, LOW 3.8%

  • After Hours: SNOW 10%, ZM 7%

TODAY’S EPISODES

Watch MRKT Call’s newest episode: S&P Rally in Jeopardy, Retail Earnings & Microsoft vs. Google

• Analysis: SPX, US10YY, TLT, DXY, Gold, VIX, HD, LOW, TJX, GOOGL, MCD, XLE, TSLA, RIVN,  IBM

• Chart of the Day: Earnings Guidance Momentum at 15 year lows

• Chart of the Day 2: MSFT vs GOOGL

• Your Questions Answered:

  • Time to get long TLT?

  • Why are the big hedge fund names like Dalio all bearish while retail / Wall Street Bets is bullish?

  • What do you cats think about the washed out oil and gas names?

Learn more about our sponsor, FactSet.

Watch RiskReversal Podcast’s newest episode: From Blue Links to AI Agents

Dan Nathan is joined by Brad Erickson, an internet analyst at RBC Capital Markets, at the RBC Capital Private Tech Conference. They discuss the performance and outlook of key tech stocks like Google and Meta amidst market volatility and AI developments. The conversation highlights the impact of AI search on Google's revenue and the competitive landscape between Google and Apple. Erickson also touches on Meta's growth in advertising efficiency and new product rollouts.

After the break, Dan dives into the broader effects of generative AI on other software companies like ServiceNow and Snowflake with Matt Hedberg, Managing Director and Head of Software Research at RBCCM. Hedberg elaborates on the early monetization of AI in software, the long-term potential of companies like Snowflake and ServiceNow, and the strategic importance of cybersecurity firms like CrowdStrike and Palo Alto in an evolving tech landscape.

Learn more about our sponsor Current and RBC Capital Markets.

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