U.S. Futures & World Markets
Stocks are basically flat this morning as Kevin Warsh presides over his first meeting as new Fed Chair. While markets expect the Fed to leave interest rates unchanged, investors will be paying close attention to Warsh's new communication style and any clues about the path forward.
As for what the bond market is pricing in, Fed Funds Futures put almost no chance on a rate cut over the next 12 months — giving Warsh the flexibility to sound hawkish even if rates go nowhere for a while.
JPMorgan summed up the shift in the AI narrative well:
"The monetization narrative has flipped from 'can they generate enough revenue' to 'there isn't enough compute.' Agentic workloads consuming 23x more tokens than conversational tasks are driving a Jevons dynamic where efficiency gains are being more than re-absorbed. The team's biggest near-term fear is adoption stalling not from lack of use cases but from token costs that are still too high for some enterprise workflows."
JPMorganGoogle's upsized $84 billion debt issuance was met with strong demand — another sign investors remain comfortable funding the AI buildout.
CORE Headlines
- Iran to regain export rights as part of deal with the U.S. — Bloomberg
- New Fed Chairman Warsh presides over his first FOMC meeting. — Bloomberg
- SpaceX said it would buy Cursor parent Anysphere for $60 billion, acquiring an autonomous coding agent. — WSJ
- DeepSeek raised more than $7.4 billion in its first fundraising round. — WSJ
- The Bank of Japan raised interest rates to a 31-year high to defend against inflationary risks from the energy spike. — WSJ
- Meta executive complains about company's reorganization. — Wired
- Microsoft may utilize DeepSeek in Copilot. — Axios
- Netflix not interested in Lionsgate. — The Wrap
- Stellantis signed a non-binding agreement with Wayve and Uber to jointly develop Level 4 robotaxi services globally.
Charts & Data
Market sentiment back to neutral — a long way from euphoria, leaving room for further upside. Goldman Sachs via Daily Chartbook: the reset from the SpaceX-period selloff was healthy. Neutral sentiment is a better starting point for a rally than extreme bullishness.
Retail bought a record $117.2M of SPCX on debut day — previous record was $92M for COIN in April 2021. Jared Blikre, Yahoo Finance via Daily Chartbook: retail's appetite for SpaceX was historically unprecedented. As of Monday, they'd bought another $93.8M.
Weight of evidence still with the bulls — bullish confirmations outnumber divergences. @granthawkridge via Daily Chartbook: "For now, the market continues to earn the benefit of the doubt."
New Dow Theory "bull confirmed" signal — equal-weight S&P and Nasdaq 100 both at ATHs. @dkellercmt via Daily Chartbook: "Remains bullish until one does not confirm the other, or both break down." The breadth expansion is confirmed by the most classic technical signal in the book.
S&P higher 90% of the time one year after a new Fed Chair — +12.7% average. Almanac Trader via Daily Chartbook: "Excluding the Great Depression and 1987 crash outliers, patience has paid off."
After sharp Momentum rallies, the factor usually struggles in subsequent months. Goldman Sachs via Daily Chartbook: "Volatile market rotations during the past week continued to follow the pattern of the sharpest Momentum rallies in recent decades." The June chop may continue.
Mag 7 collective ROE at 44% — expanded 900bps over the past three years. Goldman Sachs via Daily Chartbook: a staggering improvement in capital efficiency that justifies premium multiples.
Earnings expectations for 2026/2027 exceptional — but actual earnings rarely live up to expectations historically. Simon White, Bloomberg via Daily Chartbook: "The inflection has never been steeper. But if history repeats, valuations have a problem." Worth watching closely as Q2 earnings season approaches.
2027 S&P EPS at $393 — multiple scenario math. Mike Kantro via Daily Chartbook: at flat multiples, the math still points meaningfully higher. At expanding multiples, substantially so.
Financial conditions providing a modest tailwind — just under 1 standard deviation above neutral. Joseph Brusuelas, RSM via Daily Chartbook: not restrictive, not loose — the Goldilocks environment that lets earnings do the heavy lifting.
Interesting Reads
- Paul Graham on how to become a billionaire — Paul Graham. "Someone replied that having a few million and growing at 93% a month was radically different from being a billionaire. It turns out not merely to be false, but false in a very illuminating way."
- How Carvana's expansion to new vehicles could reshape the US market — CNBC
- ChatGPT's market share slips below 50% for the first time — TechCrunch
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