Stocks Rally as Crude Oil and Bond Yields Slump

The S&P 500 Index ($SPX) (SPY) today is up +0.78%, the Dow Jones Industrial Average ($DOWI) (DIA) is up +0.75%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +1.24%.  June E-mini S&P futures (ESM26) are up +0.70%, and June E-mini Nasdaq futures (NQM26) are up +1.15%.

Stock indexes are moving higher today, recovering some of this week’s losses, amid lower bond yields and strength in semiconductor stocks. The 10-year T-note yield is down -5 bp to 4.62%, falling back from Tuesday’s 16-month high as inflation expectations retreat amid a decline in WTI crude oil prices of more than -3%.  The weakness in crude oil today is also lifting airline stocks and cruise line operators.  However, the weakness in software stocks is limiting gains in the broader market.

Semiconductor stocks are climbing today, providing support to the broader market.  Nvidia is up more than +1% ahead of its earnings results after today’s close. Nvidia’s earnings will provide an update on the state of the AI economy, with Q1 sales expected to be up 80%, but the markets will be focused on what the company has to say about ramping up production and fending off competitors. 

US MBA mortgage applications fell -2.3% in the week ended May 1, with the purchase mortgage sub-index down -4.1%, and the refinancing mortgage sub-index down -0.1%.  The average 30-year fixed rate mortgage rose +10 bp to 6.56% from 6.46% in the prior week.

WTI crude oil prices (CLM26) remain extremely volatile and are susceptible to headlines from the Iran war.  Prices are down by more than -3% today, with NATO discussing escorting ships through the Strait of Hormuz should the route be closed after early July, which could return some crude supplies to the global market.  Late Monday, President Trump said he called off a strike on Iran scheduled for Tuesday after Gulf allies asked for more time to give diplomacy a chance.

Last Wednesday, the International Energy Agency (IEA) said in a monthly report that global oil inventories declined at a rate of about 4 million bpd in March and April, and the market will remain “severely undersupplied” until October even if the conflict ends next month.  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 6% chance of a -25 bp FOMC rate cut at the next FOMC meeting on June 16-17.

Earnings season is winding down, and reports thus far have been supportive of stocks.  As of today, 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 are mixed today.  The Euro Stoxx 50 rallied to a 1.5-week high today and is up +1.60%.  China's Shanghai Composite closed down -0.18%.  Japan's Nikkei Stock Average fell to a 2.5-week low and closed down -1.23%.

Interest Rates

June 10-year T-notes (ZNM6) on today are up +11 ticks.  The 10-year T-note yield is down -4.3 bp to 4.623%.  T-note prices are moving higher today, recovering some of this week’s sell-off, as a -3% decline in WTI crude oil prices weakens inflation expectations, a supportive factor for T-notes.  The 10-year breakeven inflation rate fell to a 1-week low of 2.473% today.  T-notes also have some carryover support from a rally in 10-year UK gilts after UK April consumer prices rose less than expected.  The strength in stocks today is limiting gains in T-notes as well as supply pressures, as the Treasury will auction $16 billion of 20-year T-bonds later today. 

European government bond yields are moving lower today.  The 10-year German Bund yield is down -8.0 bp to 3.113%.  The 10-year UK gilt yield is down -12.0 bp to 5.008%.

UK Apr CPI eased to 2.8% y/y from 3.3% y/y in Mar, weaker than expectations of 3.0% y/y.  Apr core CPI eased to 2.5% y/y from 3.1% y/y in Mar, weaker than expectations of 2.6% y/y.

ECB Governing Council member Pierre Wunsch said, "If the Iran conflict isn't resolved by June, then I think the likelihood of an ECB rate hike is quite high."

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 and AI infrastructure stocks are climbing today, providing support to the overall market. ARM Holdings Plc (ARM) is up more than +15% to lead gainers in the Nasdaq 100, and Marvell Technology (MRVL) and Advanced Micro Devices (AMD) are up more than +7%.  Also, Intel (INTC), Lam Research (LRCX), and ASML Holding NV (ASML) are up more than +5%, and KLA Corp (KLAC) is up more than +4%.  In addition, Applied Materials (AMAT) is up more than +3%, and NXP Semiconductors NV (NXPI) and Qualcomm (QCOM) are up more than +2%. 

Airline stocks and cruise line operators are rallying today with WTI crude oil down more than -3%, which lowers fuel costs and boosts profitability prospects.  Alaska Air Group (ALK) is up more than +7%, and United Airlines Holdings (UAL) is up more than +6%.  Also, Delta Air Lines (DAL) is up more than +5%, and American Airlines Group (AAL), Southwest Airlines (LUV), Carnival (CCL), and Norwegian Cruise Line Holdings (NCLH) are up more than +4%.

Software stocks are under pressure today, limiting gains in the broader market.  Intuit (INTU) is down more than -3%, and Workday (WDAY) is down more than -2%.  Also, Salesforce (CRM), Adobe Systems (ADBE), Atlassian Corp (TEAM), ServiceNow (NOW), and Autodesk (ADSK) are down more than -1%. 

Toll Brothers (TOL) is up more than +6% after reporting Q2 revenue of $2.53 billion, above the consensus of $2.43 billion. 

TJX Cos (TJX) is up more than +5% after reporting Q1 net sales of $14.32 billion, better than the consensus of $14.01 billion. 

Cava Group (CAVA) is up more than +5% after reporting that Q1 comparable restaurant sales rose +9.70%, stronger than the consensus of +5.97%. 

Packaging Corp of America (PKG) is up more than +4% after UBS upgraded the stock to buy from neutral with a price target of $248. 

Etsy (ETSY) is up more than +2% after Arete upgraded the stock to buy from neutral with a price target of $76. 

Hasbro (HAS) is down more than -8% to lead losers in the S&P 500 after forecasting full-year adjusted Ebitda of $1.40 billion to $1.45 billion, the midpoint below the consensus of $1.44 billion.

Target (TGT) is down more than -5%, despite reporting better-than-expected Q1 sales after executives warned in a conference call that Q2 comparisons are the “hardest” of the year. 

Analog Devices (ADI) is down more than -5% to lead losers in the Nasdaq 100 after reporting Q2 industrial revenue of $1.80 billion, below the consensus of $1.81 billion.

Viavi Solutions (VIAV) is down more than -1% after announcing plans to offer $500 million worth of shares of its stock in an underwritten public offering. 

Medline (MDLN) is down more than -3% after announcing a secondary offering of 60 million shares of its class A stock.

Cigna Group (CI) is down more than -1% after Deutsche Bank downgraded the stock to hold from buy.

Earnings Reports(5/20/2026)

Analog Devices Inc (ADI), elf Beauty Inc (ELF), Intuit Inc (INTU), Lowe's Cos Inc (LOW), Nordson Corp (NDSN), NVIDIA Corp (NVDA), Roivant Sciences Ltd (ROIV), Target Corp (TGT), TJX Cos Inc/The (TJX), VF Corp (VFC).