By Jamie McGeever
ORLANDO, Florida, May 11 (Reuters) – U.S. and world stocks touched new highs on Monday, as artificial intelligence fever continued to outweigh the prolonged U.S.-Iran impasse. The ceasefire is fragile and hopes of a lasting deal appear to be fading, but for now, tech-led earnings optimism is proving to be a powerful force.
In my column today, I look at stock market concentration, which is near record levels in the U.S. and across emerging markets. Should investors be worried? Not necessarily, although it could get messy once the drawdown finally gets underway.
If you have more time to read, here are a few articles I recommend to help you make sense of what happened in markets today.
1. Trump says Iran ceasefire is ‘on life support’ as hopes for a deal fade
2. Volatility, not high prices, will define Big Oil’s next chapter: Bousso
3. Trump and China’s Xi set for talks spanning Iran, nuclear, trade and AI
4. Slashing immigration could lead to higher taxes: Joachim Klement
5. Alphabet, Amazon tap overseas debt markets to fund AI infrastructure push
Today’s Key Market Moves
• STOCKS: Record highs for the S&P 500, Nasdaq, Nikkei, KOSPI, and MSCI All Country and Asia ex-Japan indices. China at 11-year high.
• SECTORS/SHARES: Six sectors on the S&P 500 rise, five fall. Tech +1%, Energy +2.6%; Comms services -2.3%. Philadelphia semiconductor index +2.6% to new high. Caterpillar +3%, Nvidia +2%; Nike -4%.
• FX: Dollar inches higher, yen the biggest G10 decliner. India’s rupee slumps, Korea’s won down sharply too.
• BONDS: U.S. Treasury yields up 6 bps at short end, bear steepening the curve. 3-year auction draws weak demand.
• COMMODITIES/METALS: Oil +3%, silver +7%.
Today’s Talking Points
* High, high, high
U.S. and global stocks are powering to fresh highs, even though oil prices and bond yields are climbing too. There’s an assumption that global supply chain disruption and rising energy and borrowing costs should cool the equity frenzy, but that’s not necessarily the case.
The artificial intelligence boom is offsetting the drag on growth from the global supply shock, and energy markets are still relatively sanguine that the Strait of Hormuz will reopen soon. BlackRock analysts remain bullish: “We see no disconnect between record U.S. equities prices and elevated oil, commodities and yields. Markets are pricing both AI-driven growth and the impact of the Middle East supply shock. We stay pro-risk as a result.”
* China whirl
Attention turns to Beijing, and the U.S.-China summit later this week between Presidents Donald Trump and Xi Jinping. Traveling with Trump is an entourage of executives from Tesla, Apple, BlackRock and several other U.S. corporate titans. Is this show of economic strength intended to intimidate Xi? Perhaps.
China’s latest ‘data dump’, meanwhile, showed surging export growth, a widening trade surplus and rising price pressures in April, suggesting the economy is moving out of disinflation. But unemployment ticked up and retail sales were disappointing.
* Funding AI
Big tech’s borrowing spree to fund the AI buildout is deepening and spreading, with Alphabet disclosing plans for its first bond sale denominated in Japanese yen and Amazon preparing its debut Swiss franc offering.
The currencies are noteworthy. They are traditionally the lowest-yielding G10 currencies, making it a relatively cheap option for the borrowers. Swiss policy rates right now are zero. It also diversifies the megacaps’ investor base. But at the end of the day, cash reserves are dwindling and debt is rising. Pressure on the mega AI capex to pay off is growing.
What could move markets tomorrow?
• Developments in the Middle East
• Energy market moves
• Australia consumer sentiment (May)
• Japan earnings including Panasonic, Mazda and Sharp
• Japan household spending (March)
• India inflation (April)
• Germany inflation (April, final)
• Germany ZEW investor sentiment (May)
• Bank of England’s Sam Woods speaks
• Brazil inflation (April)
• U.S. Treasury sells $42 billion of 10-year notes at auction
• U.S. CPI inflation (April)
• U.S. Federal Reserve officials scheduled to speak include New York President John Williams and Chicago Fed President Austan Goolsbee
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Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.
(Reporting by Jamie McGeever; Editing by Bill Bekrot)
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