Equities advanced last week to close out one of the best months in years. When trading closed on April 30, the S&P 500 had gained 10.4% for the month, while the Nasdaq Composite surged 15.3%. These gains took place despite the conflict in Iran and the situation regarding the Strait of Hormuz remaining unresolved, leaving oil prices elevated. In fact, oil prices (Brent crude) briefly spiked above the $120 mark on Thursday, after news reports that both the U.S. and Iran were planning additional attacks.
To Fundstrat Head of Research Tom Lee, the stock market’s ability to rise even as oil prices are spiking “is a reminder that the fundamentals of the U.S. economy and S&P 500 earnings have strengthened since the start of the year.”
Speaking of earnings, five of the closely scrutinized Magnificent Seven reported quarterly results last week – Alphabet GOOGL -1.10% , Amazon AMZN -0.80% , Apple AAPL 1.35% , Microsoft MSFT -0.12% , and Meta META 0.47% . Although the immediate market reactions were, as Lee put it, “a mixed bag,” all of them reported strong growth on top and bottom lines that handily beat expectations.
Head of Technical Strategy Mark Newton zeroed in on one particularly Mag Seven stock in particular. Apple “officially made a technical breakout of the minor consolidation of the last couple months,” he told us. Apple “is nearing what’s thought to be resistance on a short-term basis [and] near-term upside might prove limited,” he acknowledged. However, given Apple’s size within the S&P 500 and QQQ 0.43% , “this breakout helps to give conviction for the broader market on an intermediate-term basis,” he told us.
Newton sees the leadership behind the rally broadening, as evidenced by the equal-weighted S&P 500 RSP 0.90% pushing up to multi-day highs. “This is precisely what the bulls wanted to see, as it should help to carry the broader market back to new highs,” he wrote.
Chart of the Week
Source: Bloomberg, Fundstrat
Fundstrat’s Tom Lee argued this week that that risk-reward for software over the next 12-24 months has improved, noting that “software has reversed its entire relative performance since April 10, 2026.” This is shown in our Chart of the Week above. This recent downward movement in software stocks has largely been driven by the threat that AI poses to the software industry. Despite acknowledging the threat, Lee anticipates that “the best software companies will dynamically adjust and arguably leverage AI.” The cautious consensus outlook arguably serves as a contrarian constructive signal, raising the odds that the stronger companies will surprise to the upside, in his view. Importantly, however, Lee reminded us that “our calls can take some time to play out,” and warned that “we are not calling for a V-shaped recovery in software stocks.”
Some of today’s rally is happening given the “Mag 7” earnings carrying AAPL 3.20% , AMZN 1.15% higher, but some certainly revolves around Iran’s response to US proposal via Pakistan negotiators. Given that Crude oil’s movement has to some extent negatively correlated with US Equities over the last month, the market’s optimism surrounding an eventual deal has caused Crude oil to break its trend from mid-April today. This is seen as a fairly bearish breakdown, and my technical thought process is that Crude oil has officially peaked for the Spring. More details will help to spur on further downside acceleration, but i am expecting price to retest and break the lows from April over the next couple months. Energy likely underperforms during this time in sector performance, and today’s -1.66% performance in Energy represents the worst performance of all the major 11 sectors. Overall, it looks right to be bearish on Crude on a close today under $103.34 in front month WTI Crude futures.
Good news for air travel. The White House announced earlier this week that they were running out of emergency funding that was being used to pay TSA agents and other DHS employees. Today the House passed the Senate approved DHS funding bill that excluded ICE that will be funded separately. President Trump had supported this action.
The big news this morning in the Energy markets concerned the UAE’s planned departure from OPEC as of May 1 which has been widely discussed in the past, but one which likely has big implications given that the UAE is one of OPEC’s largest members, normally pumping over 3 million barrels/day. Thus, this looks to be a clear pivot away from the restraint normally dictated by the cartel and should be bearish on Crude once the overhang of the Strait disruption has passed. (UAE has notoriously argued regarding quotas in the past) WTI Crude is up over 3% today, and given that this dueling blockade is not showing much wiggle room, could very well lead Crude a bit higher over the next 1-2 weeks before the start of a meaningful decline. Crude’s bottom and rise since 4/17 has now coincided with six straight days of selling pressure for Equal-weighted SPX, but yet SPX and QQQ are thought to be down today largely just given OpenAI’s missed target. I sense that Tech has the power to lead markets higher if this Crude move isn’t occurring on any escalation but merely the dual blockade, but one cannot rule out Crude pushing up to 108-110 possibly before it starts to weaken as some kind of deal gets underway. Most cycles would suggest May 18-23rd might make sense for something of the sort. MACD on daily charts remains negative for WTI Crude but could cross back to positive into end of week. However, there has been a material loss of momentum that should suggest that Crude’s bounce proves short-lived and won’t get back to new highs. Given this bounce in the last two weeks, the entire pattern has begun to resemble a possible Head and Shoulders pattern, but naturally these aren’t valid until/unless the “neckline” is broken which lies near mid-April lows at approximately $79 in front month Crude futures. Short-term technical trendline support lies near $97.50
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