Wall Street's Record Highs Are Starting to Look a Little Narrow

The market is making history, but not everyone is invited. On Tuesday, the S&P 500, Nasdaq and Dow all closed at record highs. The S&P 500 even finished above 7,600 for the first time. That sounds like a broad vote of confidence in the American economy. Look closer, though, and the picture is less democratic. A small group of technology and semiconductor stocks is doing most of the heavy lifting. The rest of the market is coming along, but more like a passenger than a co-pilot.

The big names in AI still take most of the space. Nvidia has launched new PC chips. Dell and Hewlett Packard Enterprise beat expectations. Alphabet is preparing to raise $80 billion to fund its AI ambitions. Broadcom reports after the close, and its results will be treated less like an earnings release and more like a health check on the entire AI trade.

Marvell is another example of how feverish the mood has become. Its shares jumped after Nvidia's Jensen Huang described the company as a possible future "trillion-dollar company." That is the sort of compliment Wall Street hears not as praise, but as a buy order. Broadcom has also been on a tear, rising sharply in recent sessions ahead of its results.

The market's dependence on a narrow slice of chip and infrastructure names should make investors pause. Since the spring rebound began in late March, the Nasdaq 100 has climbed far more than the equal-weighted S&P 500. In plain English: the average stock is doing fine, but the chosen few are doing the actual rowing.

And today, the water is choppier. Oil prices are climbing again after a fresh escalation between the United States and Iran. Brent crude moved close to $98 a barrel, and West Texas Intermediate also rose. If the conflict keeps threatening shipping and energy supply, inflation may get another push just when investors had hoped it would calm down. The word stagflation is making a comeback.

Trump said Iran had agreed not to have a nuclear weapon, and some analysts still think a temporary deal remains possible: neither Washington nor Tehran has much interest in letting the conflict spiral further. However, anxiety is already spreading beyond crude. The dollar is stronger, helped both by safe-haven demand and by recent U.S. data showing job openings rose sharply in April. Treasury yields are moving higher, too. The 10-year yield is around 4.47%, while the two-year yield is just above 4.06%.

Today, investors are watching the ISM services index, S&P Global's manufacturing and services surveys, ADP private payrolls and the Fed's Beige Book. Friday's official jobs report looms even larger. If the labor market looks too hot, the Fed may feel more pressure to tighten. If it cools too much, investors will start worrying about growth.

In other news, private-market asset managers are under pressure after Switzerland's Partners Group capped withdrawals from an $8.6 billion private-equity fund. KKR, Blackstone, Blue Owl and Ares all fell in response. Investors should remain cautious: the private-market boom is not immune to liquidity problems.

GameStop, meanwhile, rose after reporting stronger quarterly revenue and announcing a $2 billion share buyback. That stock remains its own weather system, occasionally sunny, often strange, and never fully explained by conventional meteorology. Then there is SpaceX. Elon Musk's rocket company is reportedly preparing to price its IPO at $135 a share as it seeks to raise a record $75 billion. If successful, it could help reopen the market for giant private companies, with names such as Anthropic and OpenAI waiting in the wings.

Global signals are mixed. Asian markets have leaned into the technology rally, with Japan's Nikkei reaching another record and chip-related stocks surging. Taiwan also gained. Europe has been more cautious, weighed down by higher energy costs, tariff worries and weakness in autos and industrials, even as semiconductor names remain strong. A new OECD report added to the concern, warning that higher energy costs tied to the U.S.-Iran war could slow global growth by hitting consumers and businesses.

Tariffs are another complication. The White House is considering additional levies of 10% to 12.5% on imports from dozens of economies accused of benefiting from forced labor, though key exemptions would apply to energy, rare earths, agricultural goods, pharmaceuticals and aircraft parts. The moral principle appears firm, except where inflation might notice.

Today's economic highlights:

On today's agenda: Australia's GDP growth rates YoY and QoQ; the S&P Global Services PMI in Spain and Italy; In the United States, the MBA 30-Year Mortgage Rate, ADP Employment Change, Fed speeches by Barr, Goolsbee, and Logan, ISM Services PMI, Factory Orders MoM, and EIA Crude Oil and Gasoline Stocks Changes. See the full calendar here.

• Dollar index: 99.352
• Gold: $4,446
• Crude Oil (BRENT): $97.5 (WTI) $96.37
• United States 10 years: 4.48%
• BITCOIN: $66,616

In corporate news:

• Microsoft unveils its in-house AI to eventually break free from OpenAI
• Palo Alto Networks raises its targets thanks to AI-related cybersecurity demand, but the stock is down 3.2% in after-hours trading.
• Chevron is seeking tax incentives in Argentina with a $13.8 billion investment plan.
• Shopify is expanding its $3 billion share buyback program.
• Support from Broadcom helps contain borrowing costs as part of Anthropic's $36 billion financing.
• A subsidiary of RTX has secured a $515.8 million contract with the U.S. Navy.
• Texas Instruments has appointed Julie Knecht, an internal candidate, as Chief Financial Officer.
• Agilent receives FDA approval to expand its cancer screening test on the Dako Omnis platform.
• Cigna stops reimbursing GLP-1 treatments for obesity for its own employees.
• Meta scales back its mouse-tracking project in the face of internal pushback.
• Arch Capital prices a $2 billion bond offering.
• Applied Aerospace & Defense raises $650 million in its U.S. IPO.
• SpaceX plans to offer 555.6 million shares at $135 each as part of a $75 billion IPO, which would be the largest ever, according to Reuters.
• SK Hynix aims to double its memory chip production within five years.
• MediaTek is ramping up hiring to support its expansion into AI.
• Today's key earnings reports: Ninety One Group, B&M European Value Retail, discoverIE Group, NewRiver REIT, Ramsdens Holdings. Broadcom, Costco Wholesale, CrowdStrike Holdings, Medtronic, Inditex, Voestalpine AG, Avanza Bank Holding AB.

Analyst Recommendations:

• Chipotle Mexican Grill, Inc.: Morgan Stanley downgrades to market weight from overweight and reduces the target price from USD 49 to USD 37.
• Fedex Corporation: William O'Neil & Co Incorporated initiates coverage with a buy recommendation.
• Mgm Resorts International: CBRE Research downgrades to hold from buy and raises the target price from USD 49 to USD 50.
• Thermo Fisher Scientific, Inc.: HSBC downgrades to hold from buy and reduces the target price from USD 670 to USD 540.
• Yum! Brands, Inc.: Morgan Stanley upgrades to overweight from equalwt and raises the target price from USD 180 to USD 185.
• Albemarle Corporation: Berenberg maintains its hold recommendation and raises the target price from USD 153 to USD 192.
• Cf Industries Holdings, Inc.: JP Morgan maintains its neutral recommendation and raises the target price from USD 94 to USD 115.
• Dollar General: BNP Paribas maintains its neutral recommendation and reduces the target price from USD 144 to USD 113.
• Flex Ltd.: Fox Advisors LLC maintains its outperform rating and raises the target price from USD 160 to USD 200.
• Gitlab Inc.: Cantor Fitzgerald maintains its neutral recommendation and raises the target price from USD 27 to USD 35.
• Humana Inc.: Bernstein maintains its outperform rating and raises the target price from USD 288 to USD 425.
• Ibm: Citi maintains its buy recommendation and raises the target price from USD 285 to USD 375.
• Lululemon Athletica Inc.: Evercore ISI maintains its in-line recommendation and reduces the target price from USD 175 to USD 130.
• Marvell Technology Group Ltd: CICC maintains its outperform recommendation and raises the target price from USD 125 to USD 240.
• Medline Inc.: Baird maintains its outperform rating and reduces the target price from USD 57 to USD 45.
• Micron Technology, Inc.: Morgan Stanley maintains its overweight recommendation and raises the target price from USD 520 to USD 1050.
• Palo Alto Networks, Inc.: BMO Capital Markets maintains its outperform recommendation and raises the target price from USD 270 to USD 335.
• Ryan Specialty Holdings, Inc.: Autonomous Research maintains its underperform recommendation and reduces the target price from USD 42 to USD 26.
• Sandisk Corporation: Morgan Stanley maintains its overweight recommendation and raises the target price from USD 1100 to USD 1750.
• Strategy Incorporated: Canaccord Genuity maintains its buy recommendation and reduces the target price from USD 224 to USD 163.