This Week

Sunday night equity futures (-0.7%) and the dollar are both lower, while treasury yields are slightly higher following the US Credit downgrade from Moody’s that came late Friday. This follows a rally in equities that took the SPX within a few percentage points of its all time high. We were due for some sort of test of the rally, but most recent intraday dips have quickly found buyers. We’ll see if that trend holds or changes tomorrow.

More on the week ahead shortly—but first, a few weekend headlines, including the Moody’s downgrade:

• Moody’s downgrades United States credit rating, citing growth in government debt (CNBC)

  • Moody’s Ratings cut the United States’ sovereign credit rating down one notch to Aa1 from Aaa, the highest possible, citing the growing burden of financing the federal government’s budget deficit and the rising cost of rolling over existing debt amid high interest rates. The decision to lower the United States credit profile would be expected, at the margin, to lift the yield that investors demand in order to buy U.S. Treasury debt to reflect more risk, and could dampen sentiment toward owning U.S. assets, including stocks. That said, all the major credit rating agencies continue to give the United States their second-highest available rating.

• Bessent Dismisses Moody’s Downgrade as ‘Lagging’ Indicator (Barron’s)

  • Treasury Secretary Scott Bessent played down worries about Friday’s U.S. credit downgrade by Moody’s MCO Ratings, telling NBC News ratings are a “lagging indicator” and blaming federal spending during the previous administration.

• GM Is Pushing Hard to Tank California’s EV Mandate (WSJ)

  • General Motors increase went all in on electric cars. Now it is racing to reverse the nation’s most aggressive EV mandate. “We need your help!” GM said in an email it sent this past week to thousands of its white-collar employees. “Emissions standards that are not aligned with market realities pose a serious threat to our business by undermining consumer choice and vehicle affordability.”

• Google Is Testing a Major Change to Its Search Engine (Barron’s)

  • Google is experimenting with a significant revision to its search engine design, which could push more users to an AI-chatbot driven search experience.

• Microsoft wants AI 'agents' to work together and remember things (Reuters)

  • Microsoft envisions a future where any company's artificial intelligence agents can work together with agents from other firms and have better memories of their interactions, its chief technologist said on Sunday ahead of the company's annual software developer conference. Microsoft is holding its Build conference in Seattle on May 19, where analysts expect the company to unveil its latest tools for developers building AI systems.

Based on Friday’s option close, we enter this week with the lowest near term volatility expectations in months. The SPX expected move of just 1.6% is very close to what one would see with a VIX below 15 (the VIX closed Friday above 17) and in fact the short duration options this week are as low as 11-12 IV, which is extremely low. We’ll see what a down open potentially does to wake up volatility. With this past Friday’s large expiring positions now gone, it may allow for at least a little bit of volatility to the creep back onto the scene. For this week:

This Week’s Expected Moves:

• SPX/SPY: 1.6% (5850-6050)

  • QQQ: 2.0%

  • IWM: 2.0%

  • TLT: 1.6%

  • USO: 3.5%

The week begins with a bunch of Fed Speak and on Tuesday begins a G7 meeting.

Economic Calendar: 

• Monday

  • 8:30am - Fed Bostic Speech

  • 8:45am - Fed Jefferson Speech

  • 8:45am - Fed Williams Speech

  • 1:30am - Fed Kashkari Speech

• Tuesday

  • G7 Meeting

  • 9am - Fed Barkin Speech

• Wednesday

  • G7 Meeting

• Thursday

  • 8:30am - Initial Jobless Claims

  • 9:45am - SP Global PMI

  • 10am - Existing Home Sales

• Friday

  • 10am - New Home Sales

  • 12pm - Fed Cook Speech

On the earnings front, alot of eyes will be on the reports from large retailers like Home Depot, Target and TJ Maxx on the effects of tariffs. This week’s notable earnings reports:

Earnings (with expected moves):

• Tuesday

  • Pre-market: HD 3.9%

  • After-hours: PANW 7.4%, TOL 6.5%

• Wednesday

  • Pre-market: BIDU 6%, TGT 9.6%, TJX 4%

  • After Hours: SNOW 10%, ZM 8.1%, AMSC 19.5%

• Thursday

  • Pre-Market: ADI 4.9%, AAP 12.7%

  • After Hours: ADSK 5.3%, WDAY 7.4%

We’ve got a great week of content, stay tuned and get those questions in for the shows.

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