Wall Street Brief (May 2): US stocks diverged at highs on Friday, funds flowed back to tech heavyweights with high earnings certainty, S&P/Nasdaq continued to hit new highs; oil prices retreated from highs, crypto sector strengthened

Summary: US stocks diverged at highs on Friday, with the S&P 500 up 0.29%, Nasdaq up 0.89%, Dow Jones down 0.31%, and Russell 2000 up 0.46%. The S&P and Nasdaq continued to refresh highs, but the market no longer extended the broad-based rally seen the previous day, as funds refocused on tech heavyweights and high-beta sectors like crypto. VIX rose to 16.99, up 0.59% for the day, while hedging demand did not continue to decline even as indices hit new highs. The most direct driver that day came from Apple's earnings beating expectations, with AAPL rising 3.24% to boost the Nasdaq; meanwhile, oil prices continued to retreat, crude oil falling 2.76%, pressuring the energy sector. In major asset classes, the dollar index rose 0.12%, gold fell 0.11%, and Bitcoin gained 2.51%.

I. Major Events

1. Apple's earnings reinforce consumer tech resilience

Apple's quarterly revenue reached $111.2 billion, EPS was $2.01, with both profit and revenue surpassing market expectations; service revenue was approximately $31 billion, and revenue in China increased from $16 billion in the same period last year to about $20.5 billion. AAPL closed up 3.24%, becoming the strongest among the Magnificent Seven tech stocks. Unlike the market's recent focus on scrutinizing AI capital expenditures, Apple sent a stronger signal that 'consumer tech can still sustain profits': iPhone and service businesses provided support, and the rebound in China revenue also improved growth narratives. Against this backdrop, the Nasdaq continued to benefit and refreshed highs. However, within the tech sector, there was no synchronized upward movement, with NFLX, META, and NVDA remaining weak, indicating funds favored stocks with better earnings quality and more visible cash flows.

2. Exxon and Chevron earnings expose energy profit misalignment

Exxon and Chevron’s Q1 earnings reports showed that rising oil prices did not uniformly translate into energy company profits, as some profits were affected by hedging and supply disruptions related to the Iran conflict. Meanwhile, Hassett’s comments on increasing US crude production and reopening the Strait of Hormuz further reinforced market expectations for supply recovery. Under the combined effects of 'profit realization' and 'supply expectation repricing,' crude oil fell 2.76% that day, and XLE dropped 1.34%. The energy sector shifted from being driven by risk premiums to reevaluating profitability elasticity and downside risks from falling oil prices.

3. The Fed's transition period limits full easing expectations

Warsh is set to take over as Fed Chair, but he faces a committee that is notably more cautious about premature rate cuts. The previous FOMC meeting saw multiple dissenting votes, and variables such as inflation and oil prices still lack consensus for rapid rate cuts. This backdrop also explains why the market structure on Friday was more 'selective': a pullback in oil prices and Apple's earnings report were enough to push the S&P 500 and Nasdaq to new highs, but not enough to lift the Dow, equal-weight indexes, or traditional cyclical sectors as a whole. Capital is more inclined to chase earnings certainty and high-beta plays rather than bet on a rapid decline in interest rates.

II. Major Trends

Short-term leadership has returned to tech. Over a two-week span, QQQ rose 3.90%, significantly outpacing SPY’s 1.48%, IWM’s 1.27%, and DIA’s 0.16%. Over a three-month horizon, QQQ gained 8.54%, continuing to outperform DIA’s 1.61%. The Nasdaq led again on Friday, consistent with the support provided by heavyweight stocks like Apple, Microsoft, and Tesla. Compared to the prior day when small caps and the Dow showed strength, capital has rotated back into tech names with higher earnings visibility.

Market breadth narrowed significantly compared to the previous day. SPY gained 1.48% over two weeks, while RSP fell -0.17%, showing that market-cap-weighted performance significantly outpaced equal-weighted indexes. On the day, DIA dropped 0.33%, and XLI declined 0.93%, indicating that cyclicals and traditional heavyweights did not continue Thursday's broadening trend. Indices continued to hit new highs, but this was driven more by large-cap stocks rather than widespread gains across components.

Small caps remain elastic in the medium term but are no longer leading in the short term. IWM rose 7.75% over three months, surpassing SPY’s 4.43%, suggesting that medium-term risk appetite hasn’t disappeared. However, over two weeks, IWM only gained 1.27%, lagging behind QQQ’s 3.90%. This implies that small caps remain a more sensitive direction when risk appetite improves, but in the context of the Fed’s transition and uncertain rate-cut path, short-term capital prefers to first embrace tech heavyweights.

Big tech isn’t monolithic either. MAGS rose 0.63% over two weeks and 1.09% over three months, underperforming QQQ; XMAG increased 0.95% over two weeks and 4.59% over three months. Nasdaq strength does not equate to overall strength among the seven major tech stocks, as Apple and Microsoft’s support somewhat masked weakness in Netflix, Meta, and Nvidia. Tech remains one of the key themes, but internal rankings increasingly depend on earnings delivery and cash flow visibility.

III. Market Sentiment

VIX closed at 16.99, up 0.59% on the day. While indices continued to reach new highs, VIX did not fall in tandem, indicating that the market retained some hedging demand at elevated levels. This level remains in the lower range, not indicative of panic, but rather suggests investors are participating in risk assets while maintaining index-level protection.

The CNN Fear & Greed Index stood at 67, unchanged from the previous value, remaining in the greed zone. Sentiment did not heat up further, showing the market hasn’t entered an overheated state. Combined with Nasdaq leadership, Dow weakness, and subdued equal-weight performance, the current sentiment aligns more closely with 'risk appetite persists, but capital is more concentrated.'

Options markets reflected a similar structure. As of 15:15 Cboe time, the total Put/Call ratio was 0.76, the index options Put/Call ratio was 0.98, and the equity options Put/Call ratio was 0.62. The overall ratio was slightly higher than the previous day, with heavier hedging in index options, but the equity options Put/Call ratio remained low, indicating risk appetite at the individual stock level hadn’t receded. Considering VIX, the CNN Fear & Greed Index, and Put/Call ratios, the market hasn’t fully shifted to caution but instead retained index-level protection while pursuing selective upside opportunities after hitting new highs.

IV. Market Scan

1. Index ETFs:Index ETFs continued to diverge. SPY +0.28%, QQQ +0.96%, DIA -0.33%, IWM +0.47%. QQQ clearly led, reflecting that tech heavyweights like Apple, Microsoft, and Tesla remained the primary drivers of index gains; DIA’s weakness indicates that Thursday’s recovery in traditional heavyweights and industrial sectors wasn’t sustained. Small caps continued to rise, but their gains lagged behind the Nasdaq, signaling risk appetite retracting from 'broad-based expansion' to 'prioritizing tech and high-beta plays.'

2. Industry sectors:The sector performance showed strength in technology and weakness in energy. XLK +1.49% led the gains, while XLE -1.34% lagged behind; XLI -0.93%, XLU -0.64%, and XLV -0.57% were also weaker. The decline in oil prices continued to weigh on the energy sector, and neither industrials nor defensive sectors managed to sustain the previous day's momentum. The upward movement in the technology sector was driven more by heavyweight stocks rather than a broad-based rise in risk appetite across the entire market.

3. Seven major tech companies:Within the seven major technology stocks, divergence continued. AAPL +3.24% led the gains, with TSLA +2.41% and MSFT +1.63% following suit; NFLX -1.66%, NVDA -0.56%, and META -0.52% faced pressure. Apple’s earnings report once again demonstrated the profit resilience of consumer tech, making it one of the most important pillars supporting the Nasdaq; meanwhile, AI-related stocks are still undergoing scrutiny for capital efficiency and profitability realization. The fact that NVDA and META did not recover simultaneously indicates that tech trading is not experiencing indiscriminate growth.

4. Chinese concept stocks:Chinese concept stocks remained weak overall. NTES +0.40% performed relatively well, followed by FUTU +0.22% and KWEB +0.03%; JD -1.19% lagged behind, while TME -0.76%, BIDU -0.51%, BILI -0.36%, and BABA -0.29% were also weak. The new highs reached by the Nasdaq did not significantly boost Chinese concept stock beta, as capital remains more concentrated in domestic US tech and crypto-related plays, indicating insufficient cross-market risk appetite diffusion.

5. Cryptocurrencies:Bitcoin rose by 2.51%, and crypto-related stocks exhibited higher elasticity overall. CRCL +9.71% led the gains, followed by RIOT +7.31%, MSTR +7.08%, PLTR +3.57%, COIN +1.85%, and HOOD +1.06%, all showing increases; MARA -4.42% declined against the trend. Capital continues to chase crypto beta, but mining stocks did not rise uniformly. Stablecoins, Bitcoin proxy assets, and some high-beta software names performed stronger, indicating that crypto trading is shifting from simply following BTC to more nuanced selections based on business models and asset exposure.

$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)$$SPDR Gold ETF (GLD.US)$$CBOE Volatility S&P 500 Index (.VIX.US)$$CME-Bitcoin RR Futures (MAY6) (BTCmain.US)$$iShares Ethereum Trust ETF (ETHA.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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