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Weekly Newsletter
🔥 Fed Holds Rates with Most Dissents Since 1992
📉 Sell In May & Go Away?
🎙️ Key Takeaways From FOMC Press Conference
📉 Soft GDP And In-Line PCE Data This Week
📊 Key Takeaways From This Week’s Earnings
QUOTE OF THE WEEK:
“As we make our way through the first quarter, US growth was okay, but there's really strong tech demand, and that's driving growth in a lot of other places, particularly across Asia. I also think there is a sentiment lift taking place in the business sector that's starting to boost labor demand. And I do think we're going to see US job growth get back above 100,000 a month in the next few months.” - Bruce Kasman, JPMorgan chief economist
KEY US ECONOMIC EVENTS NEXT WEEK:
MARKET CLOSE:
WEEKLY MARKET WRAP:
Good Afternoon. Another positive week for markets fueled by strong earnings. The FOMC kept rates unchanged as expected. No material surprise with the macro data released this week, with slightly softer than expected GDP, in line with headline and core PCE.
Below are the key things to note this week:Macro data point to resilient economy:
Consumer spending remained resilient in March, with personal spending up 0.9% and real spending still positive at 0.2% despite hotter inflation. PCE prices rose 0.7% month-over-month and 3.5% year-over-year, driven by a 1.4% jump in goods prices and a 20.9% surge in gasoline prices. Core PCE moderated to 0.3% month-over-month from 0.4%, but rose to 3.2% year-over-year, keeping inflation above the Fed’s comfort zone.The caution flag is savings. Income growth improved to 0.6%, but the personal saving rate fell to 3.6% from 4.5% in January, signaling less room for consumers if inflation stays elevated. Still, the broader economy remains on a firm footing: Q1 GDP rose 2.0%, business investment was strong, driven by AI-related capex, labor costs showed limited pressure, and jobless claims fell to the lowest level since 1969. The expansion still has gas in the tank, but the consumer cushion is getting thinner.
For the week:
The S&P 500 is up 0.91%, the Nasdaq is up 1.12%, and the Dow 30 is up 0.55%.
CNN's Fear & Greed Index now stands at 67 (Greed) out of 100, up 1 point from last week. Details here
The top five trending stocks on Reddit are SPY, NVIDIA, SoundHound AI, Sandisk, and Amazon. Read More
Liquidity:
Banking Reserves + ON RRP: Banking reserves remain at approximately $2.9 trillion. ON RRP balance remains immaterial.
Standing Repo Operations: The New York Fed’s standing repo operation (primarily reflecting SRF take-up).
Here is a summary of this week’s key economic releases:
Target Rate Probabilities for June 17th FOMC Meeting:
CURATED INSIGHTS & ANALYSIS:
Sell in May doesn’t work:
Every May, the old Wall Street adage resurfaces — sell in May and go away. I ran the numbers to test it. The methodology is straightforward: starting with $10,000 in the S&P 500, the "sell in May" strategy exits the market on May 1 each year, sits in cash through October, and re-enters on November 1 — repeated every year, no exceptions, no yield assumed on cash. Over 10 years (2016–2026), staying invested turned $10,000 into $34,736; the seasonal strategy produced just $17,276 — an underperformance of 50%. Extend the window to 20 years, and the gap widens further: $57,770 versus $32,612, a 43% shortfall. The one caveat worth acknowledging — the 20-year chart shows the sell-in-May investor actually held up better through the 2008 GFC, sitting in cash while the market cratered; however, that's pure luck in my opinion, as the Lehman crisis happened in September that year. But from 2013 onward, the bull market ran hard through every summer, and the compounding gap became irreversible. I believe the lesson is clear: seasonal rules are folklore, not strategy. Time in the market beats timing the market — the data says so.
Key points from FOMC press conference:
The Fed held rates unchanged, citing solid growth, a stabilizing labor market, and inflation still above target.
Economic activity remains resilient, supported by consumer spending and strong business investment; housing continues to lag.
The labor market shows stabilization: unemployment at 4.3%, but job gains remain weak due to slower labor force growth and softer demand.
Inflation has moved higher, with PCE at 3.5% and core at 3.2%, driven by energy prices and inflation from tariff-related goods.
Rising oil prices from Middle East tensions are expected to push near-term inflation higher, with uncertain duration and spillover effects.
Near-term inflation expectations have increased, while long-term expectations remain anchored near 2%.
Policy is at the higher end of neutral or mildly restrictive, allowing the Fed to wait for clearer signals before adjusting rates.
The Committee is shifting toward a more neutral stance; internal debate on removing easing bias has intensified, with multiple dissents on guidance.
Further rate cuts require clear evidence of easing inflation, including tariff pass-through and peak energy effects; hikes are not the base case but not ruled out.
The Fed emphasized high uncertainty due to geopolitical risks and will remain data-dependent, with no preset policy path.
Earnings Takeaways:
The market is no longer paying for capex — it's paying for monetization.
All four hyperscalers raised 2026 capex on the same day, but the stock reactions diverged sharply. Alphabet closed +9.97% because Google Cloud grew 48% to $20B, with Pichai openly admitting they would have shipped more revenue if they had the compute. Meta closed -8.55% on the same capex story, without the same level of monetization proof. Microsoft fell 5%, Amazon faded 2–3%, even with a record 13.1% operating margin.
Apple did the opposite: capex of just $1.9B (down 36% YoY) plus a $100B buyback authorization. The stock went up. So the market is not anti-capex — it wants to see the revenue line that justifies the capex line. In short, beating estimates is no longer enough; AI revenue needs to grow into the spend.
Memory is the cycle's pricing problem — and it's everywhere now.
Microsoft was the cleanest tell: roughly $25B of the $190B FY26 capex is just from higher component prices — same servers, costing more. Meta cited "higher component pricing" as the explicit reason for raising 2026 capex to $125–145B. KLA called out a 100bp gross margin headwind from elevated DRAM costs through 2026. Apple flagged Mac supply constraints lasting "several months" for advanced-node SoCs.
HBM is sold out through 2026. When supply is constrained, and demand keeps rising, prices go up — the buyers absorb it as higher capex or compressed margins, and the suppliers (Micron, SK Hynix, Samsung) get the pricing benefit. In short, this is a structural reset of input costs, not a temporary shortage. The memory franchises look like the underappreciated trade in this part of the cycle.
The AI buildout is now a real-economy capex story, not just a chip story.
Caterpillar's backlog hit a record $63B (+79% YoY), with data center power generation orders up 48%. Management raised the 2030 revenue CAGR target to 6–9% and tripled the power generation expectation from 2024. Stock rallied double-digits and led the Dow. KLA raised the 2026 wafer fab equipment outlook to over $140B and, for the first time, said 2027 will grow faster than 2026. Linde committed over $1B to ultra-high-purity gas plants for advanced semiconductor fabs.
Chips need power, cooling, and gases to run. Fabs need process control equipment to be built. Last year, the AI trade was Nvidia. This year, it's spreading down the supply chain, and suppliers are signing multi-year contracts with fabs already in the ground — much harder to pull back from than a one-year budget cycle.
The premium consumer is still resilient, but the travel channel is breaking.
Mastercard's April-to-date cross-border travel collapsed from 8% growth to just 2% — a four-point drop in two weeks. Visa's CEMEA region stepped down 2.5 points. Both companies tied this directly to the Iran conflict. KO flagged Middle East volume declines starting in March. Even Meta's user numbers took a hit from "internet disruptions in Iran."
On the non-travel side, the picture is fine. Mastercard's cross-border e-travel held at 17%. KO raised its full-year EPS guide. Apple's Greater China revenue jumped 28%. Visa payments volume grew 9% constant currency. In short, the premium consumer is not retreating — the travel and Middle East corridors are. The U.S. story looks intact, but anything with travel exposure (airlines, hospitality, cross-border payments) warrants a more cautious outlook for at least the next quarter.
The Iran conflict has moved from a cost story to a demand story.
Last week, the conflict only showed up in cost lines. This week, it is also in revenue lines — the Mastercard travel deceleration, the Visa CEMEA stepdown, and the Meta user miss. On the cost side, Exxon and Chevron together booked roughly $3.6B in negative hedge timing charges, dragging headline net income down 36–45%. These are non-cash and reverse in Q2, so underlying earnings are intact — but ~15% of Exxon's worldwide output is offline, with another 750K bpd at risk if the Strait of Hormuz closes for a full quarter.
In short, the Q1 hedge distortions are a one-quarter accounting issue. Travel demand pressure is the real thing to watch — Mastercard explicitly said Q2 will be the largest headwind quarter, with a progressive recovery after that. For travel-exposed names, things will look worse before they look better.
FRONT PAGES:
Spirit Airlines Shuts Down After Bailout Talks Collapse</u>: Spirit ceased operations early Saturday after the $500M DPA rescue failed to come together — the largest US airline shutdown since Aloha in 2008. The April 30 bankruptcy hearing was postponed; bondholders never signed; opposition from Duffy, Bedford, Cruz, and Cotton stiffened through the week. CEO Davis thanked Lutnick "in particular" in the wind-down statement. American, United, JetBlue, Frontier, and Southwest are offering capped rescue fares; Deutsche Bank now sees US airlines earning $8.4B less in 2026 than pre-war estimates. Read
Fed Holds, but 8-4 Split Is the Most Dissents Since 1992: Powell's final FOMC kept the funds rate at 3.50–3.75% Wednesday, but four members dissented, the most since October 1992, with three opposed to keeping the easing-bias language. Markets briefly priced in a small probability of a 2026 hike. Warsh's nomination cleared the Senate Banking Committee the same morning along party lines. Powell said he'll stay on the Board indefinitely until the renovations probe is "well and truly over" — denying Trump a third Board seat and keeping Warsh in Miran's chair, not Powell's. Read
Q1 GDP Prints 2.0%, Misses, but Inflation Runs Hot: Advance Q1 GDP came in at 2.0% annualized vs 2.3% expected — a rebound from Q4's 0.5% near-stall. Drivers were investment (AI capex), exports, consumer, and government (federal pay normalizing post-shutdown). The headline masked a sharp Q1 PCE deflator print of 4.5% — more than double the Fed's target — driven by tariff front-running and the Iran oil shock. Atlanta Fed GDPNow had moderated to 1.3% in early April. Read
Sun Pharma to Buy Organon for $11.75B — Largest Biopharma Deal of 2026: India's Sun Pharma agreed Sunday to acquire Organon at $14/share all-cash — a 24% premium to Friday's close and a 103% premium to the April 9 price. Combines into a top-25 global pharma at $12.4B revenue, the world's #7 biosimilars player, and top-3 in women's health. Close targeted early 2027; post-deal net debt ~2.3x EBITDA. Q1 biotech M&A has already hit $84B vs $44.4B a year ago — strongest start since 2019. Read
Apollo to Buy Forvia's Auto Interiors Unit for $2.1B: Apollo Funds agreed Monday to acquire French auto-supplier Forvia's interiors business for €1.9B (~$2.1B), the latest in a string of European industrial carve-outs flowing to US sponsors as the EU manufacturing complex restructures around EV transition and weak German demand (Ifo at COVID-era lows, 2026 GDP forecast halved to 0.5%). Read
EARNINGS UPDATE:
Coca-Cola. Net revenue +12% to $12.47B; comparable EPS $0.86 (+18%) on 10% organic growth and 3% unit case volume across all segments. Coca-Cola Zero Sugar volume +13%; system added 600,000 outlets and 340,000 cold drink units. FY26 comparable EPS guide raised to 8–9% (from 7–8%) on 19.9% effective tax rate; organic revenue reaffirmed at 4–5%. Shares jumped 6% — new CEO Henrique Braun's first quarter, validated.
T-Mobile. Total revenue +10.6% to $23.1B; service revenue +11% to $18.8B; EPS $2.27. Postpaid net account adds +6% to 217K; ARPA +3.9% to $151.93. FY26 postpaid net adds guide raised to 950K–1.05M; stockholder return authorization lifted $3.6B to $18.2B. UScellular integration on track for year-end. Shares +2.2% in the aftermarket.
Visa. Net revenue +17% to $11.2B — fastest growth since 2022 ex-pandemic. EPS $3.31 (+20%). Payments volume +9% in constant dollars to $3.7T; cross-border +12%; processed transactions +9% to 66.1B. Visa Direct +23%; stablecoin-linked card programs over 160, with volume nearly tripling. Returned $9.2B to shareholders. Shares fell 1.4% amid regulatory overhang from CCCA — the discount is regulatory, not operational.
AbbVie. Net revenues +12.4% to $15.0B; adjusted EPS $2.65 (+7.7%). Skyrizi +30.9% to $4.48B, Rinvoq +23.3% to $2.12B — together more than offsetting Humira's 40.3% biosimilar decline to $688M. Neuroscience +26% to $2.88B. FY26 adjusted EPS guide raised $0.12 to $14.08–$14.28; revenue guide lifted to $67.3B. The CEO flagged the sell-side consensus understates Skyrizi's $33B 2031 peak.
Amazon. Net sales +17% to $181.5B; EPS $2.78 (boosted by Anthropic investment gains). AWS +28% to $37.6B — fastest pace in 15 quarters. Advertising +24% to $17.24B. Operating margin a record 13.1%; operating income $23.9B beat top end of guidance by $2.4B. Q1 capex $44.2B; FY26 plan reaffirmed at $200B. AWS backlog $364B (excluding the new $100B+ Anthropic deal). Shares -2–3% on capex absorption concerns.
AstraZeneca. Total revenue +8% CER (+13% reported) to $15.29B; core EPS $2.58 (+5% CER). Oncology — 44% of group — +16% to $6.8B with double-digit growth in every region. Imfinzi/Imjudo +28%, Enhertu +34% (now annualizing at $5B), Tagrisso +5% to $1.83B, Calquence +17% to $923M. Rare Disease +15% to $2.42B. Four positive Phase III readouts and 14 major regional approvals since Q4.
Alphabet. Revenue +20% to $109.9B — highest growth rate since 2022. Google Cloud crushed expectations at $20.03B vs. $ 18.05 B. Search advertising +19% on AI-driven query lifts at an all-time high. Pichai: "Compute constrained in the near term — cloud revenue would have been higher if we could meet demand." CFO flagged 2027 capex will "significantly increase" from 2026. Shares closed +9.97% — the strongest Mag 7 reaction of the week.
KLA. Revenue +11% to $3.42B; non-GAAP EPS $9.40. Wafer Inspection +16% YoY to $1.74B; Service +16% to $775M. 2026 wafer fab equipment outlook raised to "exceed $140B"; for the first time, management explicitly flagged that 2027 growth will surpass 2026. Advanced packaging process control is expected to nearly double in 2026 to ~$1B (from $635M). Board approved $7B buyback and 17th consecutive annual dividend increase.
Meta. Revenue +33% to $56.31B — fastest since 2021. EPS $10.44 ($7.31 ex-tax-benefit). Ad revenue +33% to $55B; impressions +19%, price per ad +12%, both accelerating from Q4. Operating margin held at 41%. But the 2026 capex guide was raised to $125–145B (from $115–135B) — the second consecutive upward reset. JPMorgan downgraded to Neutral on AI ROI concerns. Shares closed -8.55% on the highest volume in months.
Microsoft. Revenue +18% to $82.9B; EPS $4.27 (+23%). Azure +40% (above 37–38% guide); AI revenue annualized run rate $37B (+123%). Microsoft 365 Copilot crossed 20M paid seats. Commercial RPO $627B (+99% YoY, +26% ex-OpenAI). FY26 capex now $190B — including $25B from higher component prices. Q4 Azure guided to 39–40% constant currency, implying acceleration. Shares -5% on margin compression to 67.6% (lowest since 2022).
Apple. Revenue +17% to a March-quarter record $111.18B; EPS $2.01. iPhone $57B (+22%); Services a record $31B (+16%); Greater China +28% to $20.5B; gross margin 49.3%. The board authorized an additional $100B in buybacks and raised the dividend by 4% to $0.27. Net cash neutrality target abandoned. Q3 revenue guide of 14–17% YoY despite supply constraints. Cook to executive chairman Sept 1; John Ternus succeeds as CEO. Q2 capex was $1.9B — down 36% YoY, the deliberate counter-bet in a capex-paranoid tape.
Caterpillar. Revenue +22% to $17.42B; adjusted EPS $5.54 (+19% surprise). Backlog hit an all-time record $63B (+79% YoY). Power & Energy sales to users +32% on a 48% surge in power generation demand for data centers. Construction Industries’ fifth consecutive quarter of growth. FY26 sales guide raised to low double-digit growth; 2030 enterprise revenue CAGR target lifted to 6–9% with power generation now expected to triple from 2024. Stocks rallied by double-digits, leading the Dow.
Eli Lilly. Revenue +56% to $19.80B; adjusted EPS $8.55 (+156%) crushed $6.97 by 23%. Mounjaro: $8.66B (+125%); Zepbound: $4.16B (+80% in the US, with 80% of patients new to GLP-1s). Combined GLP-1 franchise $12.8B and added $6.7B of YoY growth. Operating margin expanded to 49% (from 43%). FDA approved Foundayo — first oral GLP-1 pill, no food/water restrictions. FY26 revenue guide raised $2B to $82–85B; EPS guide raised $2 to $35.50–$37.00. Shares +10%.
Mastercard. Net revenue +16% to $8.4B; adjusted EPS $4.60. Cross-border volume +13%, GDV +7%, switched transactions +9%. The forward read overshadowed the print: April-to-date cross-border decelerated to 9% (from 13%), travel collapsed to 2% (from 8%) due to the Iran conflict travel disruption. CFO: ex-Middle East impact, Q2 revenue growth would match Q1. Shares -4.4%. The clearest forward signal on the consumer travel cycle this quarter is flashing yellow.
Merck. Worldwide sales +5% (+3% ex-FX) to $16.3B; non-GAAP EPS -$1.28 reflects a $3.62/share Cidara acquisition charge — underlying earnings power intact. KEYTRUDA +12% to $8.0B; WINREVAIR +88% to $525M; Animal Health +13% to $1.8B. FY26 sales guide narrowed; adjusted profit outlook raised — the combination signals real margin discipline. Shares -0.8%.
Chevron. Revenue $48.61B missed $51.86B by $3.2B; adjusted EPS $1.41 destroyed $0.97 estimates — biggest EPS beat since October 2020. Net income fell 36% to $2.21B on a $2.9B Iran-conflict-driven hedge timing charge. Production dipped ~5% sequentially. CEO Wirth: Chevron is less Middle East-exposed than its peers. Refining swung to a $817M loss due to lower margins and timing effects. Shares -1% as oil prices declined intraday. The hedge distortion will reverse.
Linde. Sales +8% to $8.78B (with 5% favorable FX); underlying sales +3% on 2% price and 1% volume from project start-ups. Adjusted EPS $4.33 (+10%); operating margin 30%; ROC near 24%. Electronics +10% on AI advanced-chip investments — $1B+ of project backlog committed to ultra-high-purity plants for advanced semiconductor fabs. Q2 EPS guide $4.40–$4.50; FY26 guide tightened to $17.60–$17.90. The quietest beat of the week and one of the most operationally disciplined.
Exxon Mobil. Revenue $85.14B; EPS $1.16. Headline net income fell 45% to $4.2B ($1.00/share GAAP) on ~$700M in negative timing effects from Iran-conflict barrel redeployment. Excluding identified items and timing, earnings were $8.8B / $2.09 EPS — the more representative number. Production segment profit $5.74B on 4.6M bpd output. ~15% of worldwide output offline due to the Iran war; another 750K bpd at risk if the Strait of Hormuz closes for full Q2. Shares fall 1.4% on weaker oil prices. Hedge gains will be booked in Q2.
EARNINGS PREVIEW:
Date | Symbol | Name | Time |
4-May | PLTR | Palantir | After Close |
5-May | AMD | Adv Micro Devices | After Close |
5-May | ANET | Arista Networks | After Close |
5-May | ETN | Eaton Corp | Before Open |
5-May | PFE | Pfizer Inc | Before Open |
5-May | SHOP | Shopify Inc | Before Open |
6-May | APP | Applovin | After Close |
6-May | ARM | Arm Holdings Plc | After Close |
6-May | DIS | Walt Disney | Before Open |
6-May | UBER | UBER | Before Open |
7-May | GILD | Gilead Sciences | After Close |
7-May | MCD | McDonald's Corp | Before Open |
VIDEO’s OF THE WEEK:
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Also, check my blog here.
This newsletter's content is for informational and educational purposes only and should not be considered trading or investment recommendations. All the opinions in this newsletter are personal and do not belong to any organization.
