Are we back into a “bad news is good news” regime – and conversely, a “good news is bad news” regime? It would certainly seem that way based on the market’s reaction to Friday’s non-farm payroll report. After choppy but roughly flat trading for most of the week, the S&P 500 and Nasdaq Composite both sank after the NFP numbers came out, ending the day down 2.64% and 4.18% respectively.
Headline NFP came in at 172,000 jobs created, more than double expectations of 85,000. The casual consumer of news might interpret this as good news for the U.S., but investors saw this as further reinforcing the already dim outlook for any upcoming rate cuts by the Federal Open Market Committee for the rest of the year. In fact, odds of at least one rate hike by the December FOMC meeting, which were at 50.4% on Thursday, jumped to 72.8% on Friday afternoon (as implied by Fed funds futures trading).
Head of Research Tom Lee had already anticipated the possibility of healthy jobs numbers, but he had a more positive interpretation, viewing them as “confirming the positive fundamental signal of the strong earnings season.” First-quarter earnings season ended on Thursday, and Lee views it as having been “one of the strongest earnings seasons in several years.” The numbers support this interpretation: With first-quarter earnings season having concluded, 87% of companies beat expectations, with an overall beat of 16%. Taken as a whole, the S&P 500 showed 1Q2026 EPS growth of 29% and revenue growth of 12%.
In the short term, however, negative reaction to the strong jobs numbers led to the S&P 500 and Nasdaq Composite finishing the week in negative territory, with the S&P 500 snapping a nine-week win streak. It’s certainly not pleasant to see a winning streak end, but after the significant gains of late – roughly 20% over the past nine and a half weeks, Fundstrat Head of Technical Strategy Mark Newton reminded us that this was never going to be a sustainable pace. “We have another 30 weeks left in the year,” he reminded us at our weekly research huddle, “and I always doubted that the market was going to be up 60% this year.”
Tech arguably led the charge down on Friday, with the tech-heavy QQQ declining 4.8%. Despite any short-term discomfort, Head of Technical Strategy Mark Newton does not necessarily think that’s a bad thing. “I think tech has gotten a bit over its skis and would certainly benefit from some consolidation,” he told us at our weekly research huddle.
Chart of the Week
For some weeks, forward-looking investors had been focused on the upcoming IPOs of SpaceX, OpenAI, and Anthropic. This week, Alphabet surprised the market with an announcement that it is also planning multiple new share offerings totaling $85 billion. All told, the various offerings could result in roughly $385 billion in new equity supply heading into the market. Though Fundstrat’s Tom Lee has some longer-term concerns about market “indigestion” after the lockup periods on those offerings expire, making the shares tradeable on the open market, he pointed that that the massive amounts of cash on the sidelines – $7.8 trillion based on the latest data (seen on our Chart of the Week above) – means that the market likely has the firepower to absorb this new supply.
^SPX pullback has undercut prior lows which at current levels would finally serve to break the string of weekly gains following nine straight, but would also serve to create a bearish engulfing pattern on a weekly basis. This morning’s lows hit initial support near 7496 but could be undercut by a small amount into next week. I feel like 7481 has importance and then 7457 which both represent important technical ratios of the prior low to high swing from mid-May. It’s important to reiterate that rotation is clearly underway, with meaningful strength into Healthcare yet again today (higher by +0.76%) while Utilities and Consumer Staples are higher by 1%. However, eight sectors out of 11 are positive today, but yet the “Tech wreck” of this sector being down -3.5% is causing market breadth to still register nearly 3/1 negative. Bottom line, this pullback has the potential to extend a bit more into next week, but i am not expecting mid-May lows to be broken. Given the bearishness of Crude oil and TNX’s wave patterns in the last week, my expectation is that there might be some evidence of progress on negotiations in the Persian Gulf which arrive next week. For now, it’s tough thinking lows are in given Tech’s consolidation from its overbought state. However, barring a move under mid-May lows, the broader momentum is still strong enough on this rally to likely cause this initial selloff to potentially prove short-lived.
This chart of ^TNX has two conclusions. 1) The five-wave decline should now result in a three-wave bounce which means yields likely push higher and this is happening today and i expect this continues as WTI Crude also makes another 2-5 day bounce up to 99-101 before both reverse. Yields likely reach 4.554% or a max of 4.585% before starting to turn lower 2) A five-wave decline from 5/19-5/29 will ultimately need to work a bit lower which i think happens potentially within 1-2 weeks after this bounce in yields plays out. This gives reason for optimism about the likelihood of a mid-June deal being reached which i suspect would cause a temporary decline in rates. This US 10_Year yield index overall could have a 3-5 day bounce, but then turn down sharply as yields decline. This might allow for a temporary pullback to 4.30%, or a maximum move to 4.21% which should be a strong floor for yields before the start of a push back higher gets underway.
GOOGL -1.35% $80 billion capital raise is extraordinary considering the amount of cash it already has on the balance sheet. Given its vertical integration and LLM, i see this as an advantage for this company at a time they very well could lift their Cap-ex spend to north of $250 billion next year to $300 billion up from $190 billion this year, as they have their own infrastructure. The stock has fallen understandably given this issuance news, but is considered quite attractive technically on weakness, with an area of support extending from $341 up to $350 which makes sense as support on weakness over the next week. Given GOOGL ~7% weighting in QQQ, this very well could have a temporary negative effect on dragging down QQQ in the short run, but my expectation is that this should prove to be a temporary negative only and not too negative.
This research is for the clients of Fundstrat Direct only. Fundstrat Direct Subscription entitles the subscriber to 1 user, research cannot be shared or redistributed. For additional information, please contact your sales representative or Fundstrat Direct at fundstratdirect.com.
Conflicts of Interest
This research contains the views, opinions and recommendations of Fundstrat Direct. At the time of publication of this report, Fundstrat Direct does not know of, or have reason to know of any material conflicts of interest.
General Disclosures
Fundstrat Direct is an independent research company and is not a registered investment advisor and is not acting as a broker dealer under any federal or state securities laws.
Fundstrat Direct is a member of IRC Securities’ Research Prime Services Platform. IRC Securities is a FINRA registered broker-dealer that is focused on supporting the independent research industry. Certain personnel of Fundstrat Direct (i.e. Research Analysts) are registered representatives of IRC Securities, a FINRA member firm registered as a broker-dealer with the Securities and Exchange Commission and certain state securities regulators. As registered representatives and independent contractors of IRC Securities, such personnel may receive commissions paid to or shared with IRC Securities for transactions placed by Fundstrat Direct clients directly with IRC Securities or with securities firms that may share commissions with IRC Securities in accordance with applicable SEC and FINRA requirements. IRC Securities does not distribute the research of Fundstrat Direct, which is available to select institutional clients that have engaged Fundstrat Direct.
As registered representatives of IRC Securities our analysts must follow IRC Securities’ Written Supervisory Procedures. Notable compliance policies include (1) prohibition of insider trading or the facilitation thereof, (2) maintaining client confidentiality, (3) archival of electronic communications, and (4) appropriate use of electronic communications, amongst other compliance related policies.
Fundstrat Direct does not have the same conflicts that traditional sell-side research organizations have because Fundstrat Direct (1) does not conduct any investment banking activities, and (2) does not manage any investment funds.
This communication is issued by Fundstrat Direct and/or affiliates of Fundstrat Direct. This is not a personal recommendation, nor an offer to buy or sell nor a solicitation to buy or sell any securities, investment products or other financial instruments or services. This material is distributed for general informational and educational purposes only and is not intended to constitute legal, tax, accounting or investment advice.
The statements in this document shall not be considered as an objective or independent explanation of the matters. Please note that this document (a) has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and (b) is not subject to any prohibition on dealing ahead of the dissemination or publication of investment research.
Intended for recipient only and not for further distribution without the consent of Fundstrat Direct.
This research is for the clients of Fundstrat Direct only. Additional information is available upon request. Information has been obtained from sources believed to be reliable, but Fundstrat Direct does not warrant its completeness or accuracy except with respect to any disclosures relative to Fundstrat Direct and the analyst’s involvement (if any) with any of the subject companies of the research. All pricing is as of the market close for the securities discussed, unless otherwise stated. Opinions and estimates constitute our judgment as of the date of this material and are subject to change without notice. Past performance is not indicative of future results. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The opinions and recommendations herein do not take into account individual client circumstances, risk tolerance, objectives, or needs and are not intended as recommendations of particular securities, financial instruments or strategies. The recipient of this report must make its own independent decision regarding any securities or financial instruments mentioned herein. Except in circumstances where Fundstrat Direct expressly agrees otherwise in writing, Fundstrat Direct is not acting as a municipal advisor and the opinions or views contained herein are not intended to be, and do not constitute, advice, including within the meaning of Section 15B of the Securities Exchange Act of 1934. All research reports are disseminated and available to all clients simultaneously through electronic publication to our internal client website, fundstratdirect.com. Not all research content is redistributed to our clients or made available to third-party aggregators or the media. Please contact your sales representative if you would like to receive any of our research publications.
