Let's get to the big story breakdown as we wrap up the month of May.
We are looking at the major US stock futures set to open higher now.
Markets caught a surge following reports that US and Iranian negotiators reach a tentative 60 day ceasefire agreement, though everyone is waiting for Trump to give the final green light.
Meanwhile, massive data releases yesterday, the Fed's preferred inflation gauge to the PC showing lingering inflation while downward revisions to GDP and flat monthly income suggests the US consumer might be running on.
Time and added a historic 37% earnings pop from Snowflake and the Russell 2000 hitting its own record highs.
There's a lot to unpack.
So joining me as we wrap up the month is Eric Criscuolo, a market strategist at the NYSE.
Good morning.
Happy Friday.
Happy Friday to you too, Rey.
Well, it has been quite a month for the major US stock averages.
The Dow, Nasdaq S&P 500 hitting new record highs, and this morning we're looking at Dow rallying by over 30%.
So what do you make of what's happening?
Yes, I mean, it's still the continuing AI trade, obviously there's still a lot of momentum behind that.
Some of the older name or some of the names that were up earlier in that part of the trade like Nvidia, they've kind of cooled off a little bit.
Some of the other ones that are kind of catching up to that now like Dell and others are just continuing to see momentum.
So it kind of just keeps shifting around what names are hot right now.
Memory names, excuse me, very hot as well.
So the AI trade in general. is just lifting up everything you see it not only in tech stocks but you see it in industrial names, you know, electricity, electricity component manufacturers, construction names, you know, all these all these all these groups that are kind of tied into the AI layer at some point.
They're all just getting a bit at one point or another in this massive massive trade.
So that's obviously helping but also you just see.
The market has continually said that the Iran conflict will end relatively soon, you know, give it a month, 2 months, 3 months, whatever, but it's not a 3 year thing.
This is going to end sometime soon, so they've kind of looked past everything.
They've kind of looked past the oil prices and they said, OK, we're going to get past this, so we'll we'll just keep getting into risk assets, and that's kind of the two main things that are happening.
Yes, and this week we got key economic data, including the including the PC figures as well as the second revision to GDP here in the US and of course we can't forget that next week is the first week of June, and that means next Friday we will be getting that jobs report.
But we've also been hearing from Fed speakers as well this week.
So what do you make of the data and what does it mean for the Fed outlook?
Yes, I think you know.
Yields have come down a bit from their highs recently, so there's a bit of a pullback.
A lot of that is due to the oil prices.
Oil prices coming down as well, so they're well off their highs.
So that's helped yields come in.
The Fed is going to have to manage a lot of cross currents in addition to the fact that there's going to be totally new leadership coming in, right?
So there's two main questions.
What's Fed policy going to be, you know, the market basically has priced in, you know, flat rates to maybe even an increase in rates.
We'll see how that changes if oil continues to come in.
Those expectations will probably get priced out, so we'll price back in rate cuts if oil continues to come down.
That's a likelihood in that scenario.
But then also, you know.
They also have this other part of their their their not mandate but they're thinking of what to do with the balance sheet if they should hold longer or shorter dated treasuries, if they should, you know, how they should reposition the balance sheet that's one of Worsch's big.
Big things was how he wants to kind of redo how the Fed operates kind of internally and get into the guts of what the Fed balance sheet holds.
He can have great thoughts on it, but he's got to get the other members of the FOMC to kind of go along with him as well.
He can't just unilaterally do anything, so that kind of tension is going to have to be kind of parsed out over the next few weeks.
Yes, and as we continue to monitor Fed speeches, I do want to get your take on what we've been seeing in terms of the latest earnings reports.
We got earnings out from key retailers this week, but of course all eyes have been on Snowflake as well as Dell.
So what do you make of those gains?
Yes, I mean the reports have been fantastic for Dell and Snowflake, the price reactions may be even better.
I mean we're 30% gains in some of these really big companies, so you know there's definitely again that AI narrative that you know tech spending keeping going higher, you know, Snowflake was kind of caught up before in that, you know, uncertainty over is AI going to take away some of their business, right?
The Sapocalypse people were calling it, right.
Things have stabilized in that regard.
There are still lingering questions, but some of these really big names, you know, even, even Salesforce, you know, they've been caught up in that uncertainty as well.
And while they did not see the press reaction that Snowflake did, you know, they are showing that their business. is resilient.
They're actually putting AI into their business to make it better.
So all these kind of software companies that were kind of they had uncertainty around, they're showing what they can do to survive and thrive in this new technological era.
So that's just helping them kind of get a wind behind them.
And then you know Dell is smack in the middle of the infrastructure buildout, so they are just riding every tailwind possible right now.
Quite amazing actually those stock prices absolutely and we'll see how they open and end today's trading session.
But as we look ahead to next week, the jobs report is coming out at the end of next week and we also do get some earnings that we'll be paying attention to, especially when it comes to tech, Palo Alto Networks, as well as Broadcom.
But when it comes to the labor market as well as PMI and ISM, what are your expectations?
Yes, I mean the labor market, the labor market has held up.
Relatively well, some might say very well over this for a while now.
And so you know all the higher frequency data that we're getting, the weekly jobless claims, you know, even some of the like the ADP weekly reports, you know, they're showing a relatively healthy market that's showing no signs of stress.
Obviously that is one of the key, that is one of the two Fed mandates that they have to watch out for inflation but also full employment.
So I think, listen, the market is basically thinking that we're going to have another good print, but you know if there's not a good print, that's going to really kind of probably flip the narrative as far as getting those price cuts or those rate cuts excuse me, priced back into the market, pulling down Treasury yields even more on the downside if we get a weak print, so.
You know there's again that things are for the economy they're good, right?
Even the GDP report, it was revised lower down to 1.6% from 2%.
That's not a glaring, glaring red signal.
Certainly you want to look out for it, but Overall things are growing.
The economy is growing.
Jobs are still there, so I think the market is still pricing in basically a steady state of what we've seen is what we're going to get.
Well, a lot to watch out for in the upcoming weeks.
I appreciate your time today, Eric, and as always, thank you so much for sharing your insights.
Always a pleasure, Remy.
Have a great weekend.
Thank you.
