Stocks Fall on AI Jitters and Surging Crude Oil Prices

The S&P 500 Index ($SPX) (SPY) on Tuesday closed down -0.49%, the Dow Jones Industrial Average ($DOWI) (DIA) closed down -0.05%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed down -1.01%.  June E-mini S&P futures (ESM26) fell -0.46%, and June E-mini Nasdaq futures (NQM26) fell -0.94%.

Stock indexes settled lower on Tuesday, led by losses in technology stocks amid concerns that the massive investment in artificial intelligence will not pay off.  The Wall Street Journal reported that OpenAI recently failed to meet its goals for new users and sales, undercutting the shares of OpenAI partners and AI infrastructure stocks, including Nvidia, Oracle, Advanced Micro Devices, and CoreWeave.

On the positive side, Coca-Cola rose more than +3% to limit losses in the Dow Jones Industrials after reporting stronger-than-expected Q1 net revenue.

Stocks bounced from their worst levels on Tuesday amid better-than-expected US economic news.  The Conference Board Apr consumer confidence index unexpectedly rose +0.6 to a 4-month high of 92.8, stronger than expectations of a decline to 89.0.  Also, the Apr Richmond Fed manufacturing survey rose +3 to a 14-month high of 3, stronger than expectations of 1.  In addition, the Feb S&P composite-20 home price index rose +0.90% y/y, weaker than expectations of +1.12% y/y and the smallest pace of increase in more than 2.5 years.

Soaring crude oil prices are boosting inflation expectations, pushing bond yields higher, and weighing on stocks.  WTI crude oil jumped to a 2-week high on Tuesday after the New York Times reported that President Trump is not satisfied with Iran’s latest proposal to reopen the Strait of Hormuz and end the war, which includes postponing nuclear negotiations.  Mr. Trump has said any deal must include agreements to curb Iran’s nuclear activities. The 10-year T-note yield climbed to a 3-week high of 4.38% on Tuesday.  The 2-day FOMC meeting began on Tuesday and concludes on Wednesday, and the Fed is expected to keep monetary policy unchanged. 

WTI crude oil prices (CLM26) rose by more than +3% on Tuesday as the US and Iran are locked in a battle for control of the Strait of Hormuz, with both sides blocking the waterway to gain leverage during an extended ceasefire.  The Strait of Hormuz remains essentially closed, threatening to deepen the global energy crisis.  The ongoing blockade could exacerbate global oil and fuel shortages, as about a fifth of the world’s oil and liquefied natural gas transits through the strait. Goldman Sachs estimates that crude output in the Persian Gulf has been curtailed by about 14.5 million bpd, or more than 50%, so far in April, and that the current disruption has drawn down nearly 500 million bbl from global crude stockpiles, which could hit a billion bbl by June.

Kevin Warsh now appears to be on a glide path toward Senate approval as the new Fed Chair after Senator Thom Tillis said on Sunday that he dropped his opposition to the nomination.  Mr. Tillis dropped his opposition after the US Justice Department dropped its criminal investigation into the Fed’s overspending on the renovation of its building, in line with Mr. Tillis’ demand.  Mr. Tillis views the investigation into Fed Chair Powell as an attempt to force the Fed to cut interest rates.  The Senate Banking Committee is due to vote on Mr. Warsh’s appointment this Wednesday and then send the nomination to the full Senate for a vote.

The markets are discounting a 0% chance for a +25 bp FOMC rate hike at the Tue-Wed policy meeting.  The markets are expecting the FOMC to leave policy unchanged this week as it awaits further developments in oil prices and inflation.

Earnings season ramps up this week with several Magnificent Seven technology stocks reporting.  Earnings results thus far have been supportive of stocks.  As of Tuesday, 80% of the 172 S&P 500 companies that reported Q1 earnings have beaten estimates.  Q1 S&P 500 earnings are projected to climb +12% y/y, according to Bloomberg Intelligence.  Stripping out the technology sector, Q1 earnings are projected to increase around +3%, the weakest in two years.

Overseas stock markets settled lower on Tuesday.  The Euro Stoxx 50 fell to a 2.5-week low and closed down -0.41%.  China's Shanghai Composite closed down -0.19%.  Japan's Nikkei Stock 225 closed down -1.02%.

Interest Rates

June 10-year T-notes (ZNM6) on Tuesday closed down -5.5 ticks.  The 10-year T-note yield rose +1.0 bp to 4.350%.  June T-notes fell to a 3-week low on Tuesday, and the 10-year T-note yield rose to a 3-week high of 4.378%.  Tuesday’s +3% jump in WTI crude oil prices boosted inflation expectations and weighed on T-notes. The 10-year breakeven inflation rate rose to a 14-month high of 2.472% on Tuesday.  Also, better-than-expected US economic news on Tuesday, including Apr consumer confidence and the Apr Richmond Fed manufacturing survey, was bearish for T-note prices. 

T-notes recovered from their worst level on Tuesday amid strong demand for the Treasury’s $44 billion auction of 7-year T-notes that had a bid-to-cover ratio of 2.51, above the 10-auction average of 2.50. 

European government bond yields moved higher on Tuesday.  The 10-year German bund yield rose to a 2-week high of 3.086% and finished up +3.4 bp to 3.067%.  The 10-year UK gilt yield climbed to a 1-month high of 5.028% and finished up +3.4 bp to 5.006%.

The ECB's Mar 1-year CPI expectations rate rose to 4.0% from 2.5% in Feb, stronger than expectations of 2.8% and the highest figure in nearly 2.5 years.  The Mar 3-year CPI expectations rate rose to 3.0% from 2.5% in Feb, stronger than expectations of 2.6% and the highest figure in three years.

Swaps are discounting an 11% chance of a +25 bp ECB rate hike at its next policy meeting on Thursday.

US Stock Movers

AI infrastructure stocks and OpenAI partners retreated on Tuesday after the Wall Street Journal reported that OpenAI recently missed its own revenue and new-user targets.  ARM Holdings Plc (ARM) closed down more than -7% to lead losers in the Nasdaq 100, and Applied Digital (APLD), Applied Materials (AMAT), Sandisk (SNDK), CoreWeave (CRWV), and Vertiv Holdings (VRT) closed down more than -5%.  Also, Broadcom (AVGO), Oracle (ORCL), and KLA Corp (KLAC) closed down more than -4%, and Advanced Micro Devices (AMD), Micron Technology (MU), Marvell Technology (MRVL), ASML Holding NV (ASML), Seagate Technology Holdings Plc (STX), and Lam Research (LRCX) closed down more than -3%.  In addition, GE Vernova (GEV) and Western Digital (WDC) closed down more than -2%. 

Mining stocks fell on Tuesday, amid the sell-off in gold, silver, and copper prices.  Newmont Corp (NEM) and Coeur Mining (CDE) closed down more than -5%, and Anglogold Ashanti (AU), Southern Copper (SCCO), and Hecla Mining (HL) closed down more than -4%.  Also, Barrick Mining (B) and Freeport McMoRan (FCX) closed down more than -3%.

Packaging stocks rose on Tuesday after Citigroup said Smurfit WestRock would raise US containerboard prices by $50 per ton, effective June 1.  Packaging Corp of America (PKG) and International Paper (IP) closed up by more than +4%, and Smurfit Westrock Plc (SW) closed up more than +1%. 

Rambus (RMBS) closed down more than -20% after reporting Q1 EPS of 55 cents, weaker than the consensus of 65 cents. 

Spotify Technology SA (SPOT) closed down more than -12% after reporting Q1 operating income of $737 million, below the consensus of $787 million.

Alexandria Real Estate Equities (ARE) closed down more than -11% to lead losers in the S&P 500 after reporting Q1 revenue of $671.0 million, weaker than the consensus of $692.7 million.  

Qiagen NV (QGEN) closed down more than -10% after forecasting full-year CER net sales of up +1% to +2%, well below the consensus of +4.62%.

Pentair Plc (PNR) closed down more than -10% after forecasting Q2 adjusted EPS of $1.47 to $1.50, below the consensus of $1.50.

Corning (GLW) closed down more than -8% after forecasting Q2 core EPS of 73 cents to 77 cents, the midpoint below the consensus of 76 cents.   

Sherwin-Williams (SHW) closed down more than -3% to lead losers in the Dow Jones Industrials after forecasting full-year adjusted EPS of $11.50 to $11.90, the midpoint below the consensus of $11.72, and saying it sees little chance of end-market recovery this year due to weak consumer sentiment.

United Parcel Service (UPS) closed down more than -3% after leaving its full-year financial guidance unchanged despite reporting better-than-expected Q1 sales and profit. 

Centene (CNC) closed up more than +13% to lead gainers in the S&P 500 after reporting Q1 revenue of $49.94 billion, above the consensus of $47.41 billion, and raising its full-year revenue forecast to $187.5 billion to $191.5 billion from $186.5 billion to $190.5 billion, the midpoint above the consensus of $188.79 billion. 

Franklin Resources (BEN) closed up more than +6% after reporting Q2 adjusted EPS of 71 cents, stronger than the consensus of 55 cents.

Nucor (NUE) closed up more than +4% after reporting Q1 net sales of $9.50 billion, stronger than the consensus of $8.87 billion. 

Coca-Cola (KO) closed up more than +3% to lead gainers in the Dow Jones Industrials after reporting Q1 net revenue of $12.50 billion, better than the consensus of $12.25 billion. 

Dynatrace (DT) closed up more than +1% after the Wall Street Journal reported that Starboard Value LP took a stake in the company and is pushing the company to better capitalize on the shift to AI. 

Earnings Reports(4/29/2026)

AbbVie Inc (ABBV), Aflac Inc (AFL), Align Technology Inc (ALGN), Allstate Corp/The (ALL), Alphabet Inc (GOOGL), Amazon.com Inc (AMZN), American Water Works Co Inc (AWK), Amphenol Corp (APH), Automatic Data Processing Inc (ADP), Biogen Inc (BIIB), Bunge Global SA (BG), Carvana Co (CVNA), CH Robinson Worldwide Inc (CHRW), Chipotle Mexican Grill Inc (CMG), Cognizant Technology Solutions (CTSH), eBay Inc (EBAY), EMCOR Group Inc (EME), Entergy Corp (ETR), Equinix Inc (EQIX), Everest Group Ltd (EG), Ford Motor Co (F), Garmin Ltd (GRMN), GE HealthCare Technologies Inc (GEHC), Generac Holdings Inc (GNRC), General Dynamics Corp (GD), Humana Inc (HUM), IDEX Corp (IEX), Invitation Homes Inc (INVH), KLA Corp (KLAC), Lennox International Inc (LII), Meta Platforms Inc (META), MGM Resorts International (MGM), Microsoft Corp (MSFT), Mid-America Apartment Communities (MAA), Old Dominion Freight Line Inc (ODFL), O'Reilly Automotive Inc (ORLY), Phillips 66 (PSX), QUALCOMM Inc (QCOM), Regency Centers Corp (REG), Regeneron Pharmaceuticals Inc (REGN), SBA Communications Corp (SBAC), Stanley Black & Decker Inc (SWK), Tyler Technologies Inc (TYL), UDR Inc (UDR), Verisk Analytics Inc (VRSK), VICI Properties Inc (VICI), Vulcan Materials Co (VMC), Yum!  Brands Inc (YUM).