U.S. Futures & World Markets

We've quickly moved from a "buy the dip" tape to a "sell the rip" market. Every bounce has been met with sellers as investors worry about the AI trade, while others raise cash ahead of the highly anticipated SpaceX IPO. Stocks are higher premarket — we'll see if the market can get some follow-through to the upside or if the rally gets sold again.

Oracle is down 8% premarket despite beating earnings estimates. The major reason is that capex spending is exploding — Oracle guided to $70 billion in capex for FY2027, up from $56 billion in FY2026 and just $21 billion the year prior. That's a massive spending commitment tied to a bet on continued exponential AI demand. Everyone wants to sell picks and shovels during a gold rush, but the bill keeps getting bigger.

Yesterday, I wondered why oil prices weren't reacting to the Mideast escalation. Richard Privorotsky of Goldman offered an interesting explanation:

"A lot has been thrown at the oil market and it's simply not going up, which is remarkable given the level of escalation. The only conclusion that really fits the price action is that barrels are still getting through the Strait of Hormuz, visibly or otherwise. If there is no credible mechanism to materially disrupt flows, then the geopolitical risk premium becomes difficult to sustain. Think the tripwire is one of the two: Iran striking energy infrastructure outside its borders, or US actions moving beyond tactical degradation and toward regime change objectives."

Rich Privorotsky — Goldman Sachs

The headlines remain bullish for oil. The price action continues to say otherwise.

S&P Futures vs. Fair Value: +56.00  |  10-Year Yield: 4.52%

CORE Headlines

Charts & Data

IPO performance and 1-year max drawdowns — a reality check before SpaceX. Nick's chart of the day: big shiny IPOs almost always have a moment where they punish those who don't have conviction. Know what you own before you buy it.

May CPI: +4.2% overall — fastest since April 2023; core +2.9%. Ben Casselman via Daily Chartbook: "The good news is that there isn't much evidence of broader pass-through of energy prices so far — emphasis on 'so far.' Excluding energy, prices are up 2.9% over the past year, up only modestly from before the war." A nuanced read that gives the Fed something to work with.

Inflation breadth increasing — share of CPI items above 4% annualized rising again. @lizthomasstrat via Daily Chartbook: "Not to the level of what we saw in 2022-24, but moving in the wrong direction." The breadth of inflation matters as much as the headline.

Historically, when CPI crosses back above 4%, the macro backdrop for equities became much more difficult. HBM Strategies via Daily Chartbook: at 4.2%, May CPI has just crossed that threshold. This is the chart that should concern bulls the most.

Mortgage demand rising — purchase and refi apps both up; 30-year rate at 6.78%. Haver Analytics via Daily Chartbook: despite elevated rates, mortgage demand is picking up. The housing market is resilient but not booming.

Bitcoin rolling 30-day flows went from a 6-month high to an all-time low in less than a month. Duality Research via Daily Chartbook: one of the fastest sentiment reversals in crypto history. Capital is being reallocated, not destroyed.

Precious metals ETF flows cooling — contrarian boost potential. Todd Sohn, Strategas via Daily Chartbook: "The temperature has cooled towards precious metals." When everyone leaves a trade, mean-reversion opportunity can emerge.

Downside protection demand spiked from lowest in a year to 72nd percentile in days. Bloomberg via Daily Chartbook: "Traders are loading up on downside protection." The shift from maximum complacency to active hedging happened very quickly — a sign of regime change in investor psychology.

S&P top-of-book depth at lowest since April 2025 — 1st percentile on 1-year lookback. Goldman Sachs via Daily Chartbook: "The diminished ability to transfer risk in the face of mechanical selling pressure can exacerbate pain in US equity markets should it persist." Thin liquidity amplifies both rallies and selloffs.

LLM spending bifurcating — frontier AI for large-cap balance sheets; simpler models for everyone else. Citadel via Daily Chartbook: "Growing signs of a bifurcation in frontier vs. 'everyday' AI usage." This has major implications for which companies ultimately monetize AI and at what margin.

BYD says EVs may soon take 80% of China's new car market. Chartr via Daily Chartbook: a staggering projection if true. The implications for global oil demand — and for Tesla's growth story — are significant.

Interesting Reads

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