Stocks Settle Mixed on Tech Weakness and Inflation Pressures

The S&P 500 Index ($SPX) (SPY) on Tuesday closed down -0.16%, the Dow Jones Industrial Average ($DOWI) (DIA) closed up +0.11%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed down -0.87%.  June E-mini S&P futures (ESM26) fell -0.16%, and June E-mini Nasdaq futures (NQM26) fell -0.90%.

Stock indexes settled mixed on Tuesday.  The broader market was under pressure amid weakness in technology stocks, following Monday’s rally that pushed the S&P 500 and Nasdaq 100 to new record highs.  The ongoing stalemate in the Middle East between the US and Iran is keeping the Strait of Hormuz closed, weighing on market sentiment, and pushing crude oil prices and bond yields higher.  The 10-year T-note yield rose +5 bp to 4.46%.

Stock indexes added to their losses on Tuesday amid signs of accelerating inflation after the US Apr CPI rose 3.8% y/y, stronger than the 3.7% y/y expected and the largest increase in almost 3 years.  Also, Apr core CPI rose +2.8% y/y, stronger than expectations of +2.7% y/y and the largest increase in six months.

However, stock indexes bounced off their lows, and the Dow Jones Industrial Average moved into positive territory on the strength of health insurance stocks.

Hawkish comments on Tuesday from Chicago Fed President Austan Goolsbee were bearish for stocks and bonds, as he said the worst part of today's April CPI report is services inflation and that "the Fed has got to be thinking about how do we break the chain of escalating inflation." 

In the latest developments in the Middle East, President Trump called Iran's response to his peace proposal a "piece of garbage" and said that the current ceasefire was on "life support." Mr. Trump said, "Iran will make a deal or be decimated." 

WTI crude oil prices (CLM26) rose more than 4% on Tuesday, as President Trump cast doubt over the ceasefire with Iran, saying the truce was on “massive life support,” prolonging the closure of the Strait of Hormuz.  The strait remains essentially closed, as about a fifth of the world’s oil and liquefied natural gas transits through the strait.  Goldman Sachs estimates that the current disruption has drawn down nearly 500 million bbl from global crude stockpiles, with the drawdown potentially reaching 1 billion bbl by June.

The markets are discounting a 4% chance of a -25 bp FOMC rate cut at the next FOMC meeting on June 16-17.

Earnings reports thus far in this reporting season have been supportive of stocks.  As of Tuesday, 83% of the 454 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 mixed on Tuesday.  The Euro Stoxx 50 closed down -1.48%.  China's Shanghai Composite fell from a 10-year high and closed down -0.25%.  Japan's Nikkei Stock Average closed up +0.52%.

Interest Rates

June 10-year T-notes (ZNM6) on Tuesday closed down -12 ticks.  The 10-year T-note yield rose +4.9 bp to 4.462%.  Jun T-notes matched last Monday’s 6-week low on Tuesday, and the 10-year T-note yield rose to a 6-week high of 4.465%.  T-notes were under pressure on Tuesday amid a +4% surge in WTI crude oil prices, which boosted inflation expectations.  Also, Tuesday’s stronger-than-expected US April CPI reports signal accelerating inflation, a bearish factor for T-notes.  In addition, T-notes weakened on comments from Chicago Fed President Austan Goolsbee, who said the US has an inflation problem. 

T-note price fell further on Tuesday afternoon amid weak demand for the Treasury’s $42 billion auction of 10-year T-notes that had a bid-to-cover ratio of 2.40, below the 10-auction average of 2.49. 

European government bond yields moved higher on Tuesday.  The 10-year German Bund yield rose to a 1.5-week high of 3.105% and finished up +6.1 bp to 3.101%.  The 10-year UK gilt yield surged to a 17-year high of 5.135% and finished up +10.3 bp to 5.101%.

The German May ZEW survey expectation of economic growth unexpectedly rose +7.0 to -10.2, stronger than expectations of a decline to -19.5.

ECB Governing Council member Christodoulos Patsalides said, "As things stand, inflation risks are worsening," which points to an ECB interest rate hike in June.

Swaps are discounting an 87% chance of a +25 bp ECB rate hike at its next policy meeting on June 11.

US Stock Movers

Chipmakers were on the defensive Tuesday, giving back some of Monday’s sharp gains as the AI infrastructure rally cooled.  Qualcomm (QCOM) closed down more than -11% to lead losers in the S&P 500 and Nasdaq 100, and Intel (INTC) closed down more than -6%.  Also, Sandisk (SNDK) and Western Digital (WDC) closed down more than -5%, and Micron Technology (MU), Marvell Technology (MRVL), and NXP Semiconductors NV (NXPI) closed down more than -3%.  In addition, Applied Materials (AMAT), Advanced Micro Devices (AMD), ASML Holding NV (ASML), Seagate Technology Holdings Plc (STX), Lam Research (LRCX), ARM Holdings Plc (ARM), and  Broadcom (AVGO) closed down more than -2%. 

Software stocks retreated on Tuesday, weighing on the overall market.  Salesforce (CRM) closed down more than -3% to lead losers in the Dow Jones Industrials.  Also, Oracle (ORCL) closed down more than -3%, and ServiceNow (NOW), Adobe Systems (ADBE), and Atlassian Corp (TEAM) closed down more than -2%.  In addition, Microsoft (MSFT), Intuit (INTU), Datadog (DDOG), and Workday (WDAY) closed down more than -1%.

Defensive health insurance stocks rallied on Tuesday, providing support to the overall market.  Humana (HUM) closed up more than +7%, and Centene (CNC) closed up more than +5%.  Also, UnitedHealth Group (UNH) closed up more than +3% to lead gainers in the Dow Jones Industrials, and Elevance Health (ELV), United Health Services (UHS), CVS Health Corp (CVS), the Cigna Group (CI), and Molina Healthcare (MOH) closed up more than +3%.

Power Solutions International (PSIX) closed down more than -38% after reporting Q1 revenue of $128.6 million, well below the consensus of $161 million. 

Hims & Hers Health (HIMS) closed down more than -13% after reporting Q1 revenue of $608.1 million, weaker than the consensus of $617.5 million, and forecasting full-year adjusted Ebitda of $275 million to $350 million, the midpoint below the consensus of $319.3 million. 

AST SpaceMobile (ASTS) closed down more than -11% after reporting a Q1 net loss of -$191.0 million, a wider loss than expectations of -$76.3 million. 

Gitlab (GTLB) closed down by more than -9% after announcing plans to cut jobs and make operational changes, moves Raymond James said will be challenging. 

Webtoon Entertainment (WBTN) closed down more than -8% after forecasting Q2 revenue of $332 million to $342 million, well below the consensus of $359.9 million. 

West Pharmaceutical Services (WST) closed down more than -2% after saying it has experienced a material cybersecurity attack that has disrupted operations globally.

PACS Group (PACS) closed up more than +29% after reporting Q1 revenue of $1.42 billion, stronger than the consensus of $1.36 billion, and raising its full-year Ebitda forecast to $605 million-$625 million from a previous forecast of $555 million-$575 million, well above the consensus of $567 million. 

Wendy’s (WEN) closed up more than +17% after the Financial Times reported that Trian Fund Management is seeking investor backing for a bid to take the company private. 

Venture Global (VG) closed up more than +14% after reporting Q1 adjusted net income of $488.0 million, well above the consensus of $337.2 million. 

Zebra Technologies (ZBRA) closed up more than +11% to lead gainers in the S&P 500 after reporting Q1 adjusted EPS of $4.75, stronger than the consensus of $4.25, and raising its full-year adjusted EPS forecast to $18.30 to $18.70 from a previous forecast of $17.70 to $18.30. 

Qnity Electronics (Q) closed up more than +9% after reporting Q1 net sales of $1.42 billion, above the consensus of $1.27 billion. 

Steris Plc (STE) closed up more than +4% after forecasting 202y adjusted EPS from continuing operations of $11.10 to $11.30, above the consensus of $11.08. 

Earnings Reports(5/13/2026)

Amdocs Ltd (DOX), Birkenstock Holding Plc (BIRK), Cisco Systems Inc (CSCO), Doximity Inc (DOCS), Dynatrace Inc (DT).