The market sits in a consolidation with a lot of movement below the surface. The S&P 500 equal weight index has pulled back over 6%, close to 7%, and is nearing its 50-day moving average, with the 200-day moving average setting its direction. Stocks as a whole stay near all-time highs when you look at the S&P 500 and NASDAQ. Volatility is subdued, with the VIX at 16, implying about a 1% move.
The share of S&P 500 stocks trading above their 50-day moving average sits at 24%. In the past, that level has been where buyers step in to pick up beaten-down stocks, but that buying has not shown up yet.
Crude and Yields Split Apart
Since roughly the 24th, last Thursday, crude oil and yields have diverged. The market had been running with yields, crude, and the dollar all higher together. Over the last couple of days crude oil broke to the downside while yields kept rising. That correlation is fracturing. This suggests other forces are pushing yields up beyond the energy story - the market may be preparing for energy price pressure to spread into other parts of the economy. PCE data is due at the bottom of the hour. Whether this split holds over the next few days, and whether it becomes a real break, is worth watching.
Rotation Into Oversold Sectors
Some opportunities are showing up in unloved sectors like utilities. Electric power generation companies were among the bigger movers, with names like XL Energies and Edison International catching strong bids after being sold off hard. Some defensive stocks caught a bid. I am looking for a full rotation - not out of the mega cap names, but putting money to work in areas that have been heavily oversold and are likely undervalued.
Why High Yields Have Not Broken Stocks
The 10-year and 30-year yields pulled back after hitting multi-decade highs. Rising yields have not pressured stocks as much as expected because the indexes are heavily weighted to technology, communication services, and somewhat consumer discretionary. Many of those companies do not depend on rising inflation or rates - they run different business models and hold more cash and free cash flow to weather the storm.
For the last four sessions, yields have sold off early in the day, then sellers step into equities once the session opens. That pattern may continue. A batch of major economic data is coming in the next hour, the jobs report lands Friday, and many Fed speakers are lined up. Some Fed speakers have been less hawkish than the street expected, which drove a small bounce after an early flush. Yields remain a concern and the trajectory still points higher, with no technical break yet. A relief bounce likely comes after this week's data lets the market reassess the Fed's rate path.
AI Rebranded as Super Intelligence
President Trump ordered federal agencies to replace the term "artificial intelligence" with "super intelligence." This looks political ahead of the midterms, since AI concerns have been a sticking point in districts his party will have to defend.
Tech leaders signed a two-page framework at the White House on AI safety, agreeing to check each other's work to confirm systems are safe. Trump called this memorandum a form of protection and said it is "morally binding." Companies are making solid PR moves here, with Meta (META) leading on AI safety messaging. The heavy hitters showed up, but it was not a big stock mover. An open question is whether this AI headwind fades after November's midterms. Demand for AI stays strong, along with demand for power for data centers, and that direction looks set to continue.
Micron Earnings Preview
Micron (MU) reports earnings, the heavy hitter on the earnings front. Revenue should beat on a year-over-year basis, but the sequential quarter-over-quarter number is the critical figure. The market expects DRAM and NAND chips to stay in high demand, since they are a viable option for running inference, which will eventually make up most AI or "super intelligence" compute. The market wants Micron (MU) to keep telling that story.
On the weekly chart, Micron (MU) broke down after last quarter's earnings, then consolidated around the $80 level, and is now testing higher. A breakout above roughly the $114 area would push it to the upside in a market that has been dull at the index level, with churn in technology and selling in other sectors. Options traders will focus on this name for a major move. The fundamental theme should hold: very strong demand. If Micron (MU) says it can raise capacity without letting capex spend outpace those capacity gains, that would be a tailwind.
Key S&P 500 Levels
Downside support sits at 7630, where the bulk of put flow is concentrated. To the upside, 7700 was resistance; a break above it opens the way to 7710-7715. The setup is skewed slightly to the upside, pending the economic data hitting the tape.
