Good morning and welcome to today's market chronicle. It's Thursday, May 28th. The Dow Jones Industrial Average closed at a fresh all-time high yesterday, which is the kind of news that sounds excellent until you remember the U.S. military spent Wednesday night conducting fresh airstrikes on Iran.
Officially, yesterday was respectable. The Dow added 183 points and set a record, because the Dow sets records now with the casual ease of a man who has stopped worrying about consequences. The S&P 500 and the Nasdaq, less easily thrilled, moved roughly two hundredths of a percent in either direction and called it a day. The chip sector, which had been doing the heavy lifting for the Nasdaq all week, decided to take a breather, so Nvidia ($NVDA) and its satellites pulled back, and the market's new enthusiasm migrated to consumer staples and consumer discretionary. Translation: when traders start buying soap companies because they have run out of semiconductors to reach for, it is not what anyone would call conviction. The real story, as so often, was oil. West Texas Intermediate edged above $89 a barrel overnight, after the Pentagon confirmed fresh strikes on an Iranian military site described as a threat to commercial shipping through the Strait of Hormuz. A week ago, everyone was pricing in a peace deal and crude fell five percent in a single session. Now there are new strikes. The Dow sets records; the Strait of Hormuz is on fire. Who actually won here?
But everyone is pretending not to notice the mismatch. S&P 500 futures are barely changed this morning, hovering near 7,538, down a tenth of a percent, as if a military escalation at one of the world's busiest oil chokepoints is roughly equivalent to a mildly disappointing earnings call. The 10-year Treasury yield sits near 4.50%, stoic, unhelpful. Gold trades around $4,541, a number that sounds appropriately alarmed but is really just gold doing its thing, unmoved by events it has been ignoring for months. Bitcoin holds near $77,000, also unbothered, possibly asleep.
This morning at 8:30, two data points arrive that the Fed cares about considerably more than any of us wants to admit: April PCE inflation and the second estimate of first-quarter GDP. Core PCE is expected somewhere around 3.3% year-over-year, which is the Fed's preferred metric for "still too high." The Q1 GDP second reading will either confirm or lightly revise the 2.0% advance estimate. In a rational world, both prints inform rate expectations and markets respond accordingly. In this world, if the numbers are bad, someone on financial television will explain why they are actually bullish.
The wonderful world of finance soldiers on. Have a good one.