Wall Street Daily (May 16): US stocks retreated from highs on Friday, with oil prices surging and long-term yields spiking; market sentiment shifted from chasing gains to caution. High valuation assets like AI hardware came under pressure, while gold and Bitcoin fell.

Summary: US stocks saw a notable pullback on Friday, with the S&P 500 down 1.24%, Nasdaq down 1.54%, Dow Jones down 1.07%, and Russell 2000 down 2.44%. After consecutive record highs, market pressure returned to oil prices and long-term yields: crude oil rose 3.41%, raising inflation concerns, while rising US Treasury yields compressed valuations of high-valuation assets. The VIX rose to 18.43, up 6.78% in a single day, reflecting a shift in sentiment from chasing gains to caution. In terms of sectors, Energy XLE bucked the trend by rising, with Oil & Gas Exploration XOP performing the strongest; materials, semiconductors, small caps, and crypto chains faced greater pressure. In major asset classes, the US Dollar Index rose 0.38%, gold fell 2.40%, crude oil rose 3.41%, and Bitcoin fell 2.88%.

I. Major Events

1. Crude oil prices jumped, and US Treasury yields surged.

The most important external variable on Friday was the renewed rise in oil prices, leading to heightened inflation concerns and a pullback in US stocks from record highs. Crude oil rose 3.41%, while the S&P 500, Nasdaq, Dow Jones, and Russell 2000 all fell in tandem, and gold also dropped 2.40%. The key to this chain reaction is not just 'rising oil prices, rising energy stocks.' Once oil prices rise again, the market first reassesses inflation, then reevaluates long-term yields and rate cut expectations. Yields on 30-year and 10-year US Treasuries surged, directly pressuring risk assets.

2. Pershing Square bets on Microsoft.

Bill Ackman's Pershing Square initiated a position in Microsoft and sold its long-held stake in Alphabet. This news did not change the overall market's downward direction but explained an important divergence within the Magnificent Seven tech stocks: While the Nasdaq fell 1.54% and the MAGS ETF tracking the Magnificent Seven dropped 1.85%, Microsoft (MSFT) bucked the trend, rising 3.05%. Overall, high-valuation, high-volatility AI hardware chains faced more pressure, with NVIDIA (NVDA) dropping 4.42% and the semiconductor index SMH falling 3.80%; Microsoft, with more stable cash flow and relatively controlled valuation controversy, saw funds repricing it positively.

II. Major Trends

Friday saw a pullback from high levels, not ordinary volatility. The S&P 500 fell by 1.24%, Nasdaq dropped by 1.54%, Dow Jones declined by 1.07%, and Russell 2000 plunged by 2.44%. On the ETF front, IWM fell by 2.41%, significantly weaker than SPY’s -1.20% and QQQ’s -1.51%. Small-cap stocks are more sensitive to financing costs and risk appetite, so they were the first to face pressure as long-term interest rates rose.

The mid-term structure is still dominated by large-cap growth, but the breadth problem is more prominent. Over a two-week horizon, QQQ gained 5.16%, still stronger than SPY's 2.57%, while RSP was at -0.62%, and IWM also turned negative in the short term. Over a three-month horizon, QQQ surged 17.93%, SPY increased by 8.72%, and RSP was at -0.22%. Previous index highs relied more on market cap weighting and growth stocks; equally-weighted portfolios did not truly keep up.

In terms of style, growth remains dominant, but volatility has started to increase. SPYG rose 15.06% over three months, significantly higher than SPYV's 1.89%; MAGS climbed 14.21% over three months, higher than XMAG’s 4.46%. When oil prices and interest rates simultaneously disturbed the market, tech and AI sectors with significant previous gains became more likely to be realized, and funds began reassessing cash flow quality and valuation safety margins.

III. Market Sentiment

The VIX closed at 18.43, rising 6.78% in a single day. This change corroborates the synchronized decline of the four major indices, indicating that Friday was not just simple profit-taking but a tightening of risk pricing. Although the VIX has not yet entered the panic zone, it is enough to show that the market's precaution against volatility is increasing. The CNN Fear & Greed Index stood at 63, down from a previous value of 65, still in a relatively greedy range but marginally retreating. Sentiment hasn’t shifted directly from optimism to panic, but the prior momentum-driven state after consecutive new highs has been interrupted, and funds have begun re-evaluating the relationship between oil prices, interest rates, and high-valuation assets.

Regarding CBOE Put/Call ratios, the total Put/Call ratio was 0.92, the index options Put/Call ratio was 1.04, and the equity options Put/Call ratio was 0.85. Protection was still retained on the index side, while equity options converged more noticeably compared to the previous day. This combination indicates that investors have not fully retreated from risky assets, but they are no longer as actively assuming individual stock risks as they were the day before.

IV. Market Scan

1. Index ETFs:All index ETFs fell, with the Dow ETF DIA declining 1.08%, showing relative resilience. The S&P 500 ETF SPY fell by 1.20%, the Nasdaq 100 ETF QQQ dropped by 1.51%, and the Russell 2000 ETF IWM fell by 2.41%, performing the worst. The larger declines in small caps suggest that rising interest rates and cooling risk appetite hit financing-sensitive assets more directly.

2. Industry sectors:Sector performance clearly reflected oil price trading. Energy XLE rose 2.36%, being the only strong sector among the 11 major sectors. Materials XLB fell 2.65%, Utilities XLU dropped 2.29%, Technology XLK decreased by 1.81%, Consumer Discretionary XLY declined 1.80%, and Industrials XLI fell by 1.78%. Rising oil prices supported energy but simultaneously lowered overall market valuations and risk appetite. In sub-sectors, Oil & Gas Exploration XOP rose 2.90%, representing the clearest positive return direction. On the other hand, Copper COPX fell 7.08%, Gold Miners GDX dropped 7.03%, Uranium URA declined 4.90%, and Semiconductors SMH fell 3.80%. Resources and high-volatility tech faced simultaneous selling pressure. Software IGV rose 1.26%, and Cybersecurity CIBR increased by 0.88%, outperforming Technology XLK, suggesting defensive differentiation within tech.

3. Seven major tech companies:There were significant internal differences among the Magnificent Seven tech stocks. Microsoft MSFT rose 3.05%, leading the group, while NVIDIA NVDA fell 4.42%, Tesla TSLA dropped 4.75%, and the Magnificent Seven Tech ETF MAGS declined 1.85%. This data suggests that Friday wasn't a 'synchronized collapse of tech as a whole' but rather a market repricing within tech: directions with stable cash flow and less valuation controversy were more resilient, while high-volatility AI hardware and high-beta growth stocks faced heavier pressure.

4. Chinese concept stocks:Chinese concept stocks continued to face pressure. Bilibili BILI fell 6.15%, Alibaba BABA dropped 6.04%, Baidu BIDU declined 5.56%, Futu FUTU fell 4.85%, China Internet ETF KWEB dropped 3.53%, and JD.com JD fell 2.59%. PDD Holdings PDD slightly increased by 0.26%, being one of the few relatively resilient stocks. As global risk appetite cooled, elastic Chinese assets remained easy targets for position reductions.

5. Cryptocurrencies:Bitcoin fell 2.88%, with the crypto chain weakening simultaneously. MicroStrategy MSTR dropped 5.11%, MARA fell 6.40%, Coinbase COIN declined 4.88%, Robinhood HOOD fell 4.41%, and Circle CRCL dropped 7.98%. Friday’s cryptocurrency performance resembled high-beta risky assets rather than independent safe-haven assets. Bitcoin's retreat, rising interest rates, and cooling of highly volatile individual stock positions collectively weighed down this sector.

$S&P 500 Index (.SPX.US)$$SPDR S&P 500 ETF (SPY.US)$$NASDAQ 100 Index (.NDX.US)$$Invesco QQQ Trust (QQQ.US)$$Dow Jones Industrial Average (.DJI.US)$$State Street® SPDR® Dow Jones Industrial Average® ETF Trust (DIA.US)$$Russell 2000 Index (.RUT.US)$$iShares Russell 2000 ETF (IWM.US)$$Roundhill Magnificent Seven ETF (MAGS.US)$$USD (USDindex.FX)$$U.S. 10-Year Treasury Notes Yield (US10Y.BD)$$iShares 20+ Year Treasury Bond ETF (TLT.US)$$XAU/USD (XAUUSD.CFD)$Bitcoin (BTC.CC) Ethereum (ETH.CC)$SPDR Gold ETF (GLD.US)$$CBOE Volatility S&P 500 Index (.VIX.US)$$NVIDIA (NVDA.US)$$Tesla (TSLA.US)$$Meta Platforms (META.US)$$Amazon (AMZN.US)$$Alphabet-C (GOOG.US)$$Microsoft (MSFT.US)$$Apple (AAPL.US)$

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