Wall Street Daily (May 5): US stocks retreated from highs on Monday as the market repriced the impact of oil price shocks. Sentiment was cautious but not panicked; the Dow led declines while tech heavyweights remained relatively stable, and the crypto sector stood out with strength.

Summary: US stocks fell from their highs on Monday, with the S&P 500 down 0.41%, Nasdaq down 0.19%, Dow Jones down 1.13%, and Russell 2000 down 0.60%. Indices weakened broadly but at different paces: the Dow and cyclical sectors saw more pronounced pullbacks, while tech-heavy sectors were relatively stable. The VIX rose to 18.29, up 7.65% on the day, reflecting that after tensions in the Middle East flared up again, the market began pricing in risk premiums for oil price volatility and growth uncertainty. However, levels around 18 indicate 'more caution' rather than 'panic.' The most significant pricing change of the day was that uncertainty about a ceasefire re-entered trading frameworks, with crude oil rising 2.58%, making energy one of the few sectors moving against the trend. Meanwhile, progress in stablecoin legislation provided more 'self-catalyzing' trading cues, with CRCL surging 19.89% and Bitcoin up 1.12%, keeping the crypto sector active despite weak overall market performance. In terms of major asset classes, the US Dollar Index rose 0.27%, gold fell 2.00%, crude oil rose 2.58%, and Bitcoin gained 1.12%.

I. Major Events

1. Fragility of the Middle East ceasefire re-enters pricing.

Middle East conflicts escalated again, prompting the market to reprice the fragility of the ceasefire and the risks associated with Hormuz shipping routes. Crude oil thus closed up 2.58%, and risk appetite shifted from elevated levels to a more cautious stance. Structurally, the segments most immediately pressured were those more dependent on global growth and cost stability: traditional cyclical sectors like the Dow falling 1.13%, Russell 2000 down 0.60%, XLI down 1.14%, and XLB declining 1.36%. The Nasdaq fell only 0.19%, continuing to exhibit relative defensive attributes among tech-heavy sectors, though geopolitical disruptions and rising oil prices have now been more explicitly factored back into valuation frameworks.

2. Breakthrough in stablecoin bill ignites Circle and the crypto sector.

The US cryptocurrency legislation made a breakthrough in provisions related to stablecoin yields, leading the market to upgrade expectations for the feasibility of legislative progress. Circle became the most direct beneficiary, with CRCL closing up 19.89%; Bitcoin rose 1.12%, and MSTR surged 7.08%. The crypto sector performed relatively independently despite the broader market's weakness. Notably, even amid an overall contraction in risk budgets, capital still flowed toward sectors with clearer policy catalysts and higher elasticity, paying a premium for these niches.

3. GameStop's hefty offer for eBay reignites M&A speculation

Ryan Cohen pushed GameStop to make a non-binding acquisition offer of approximately $56 billion to eBay, with a bid of $125 per share in a cash-and-stock combination. While the event did not alter the main direction at the index level, it served as a reminder that event-driven and localized speculative trading remain active in an environment of rising volatility. In contrast, what truly drives index risk appetite is still the repricing brought about by developments in the Middle East and the rebound in oil prices.

II. Major Trends

Technology remains a relatively strong core direction in the short term. Over a two-week period, QQQ rose 4.03%, significantly higher than SPY's 1.31% and far outpacing DIA's -0.67%. On a three-month basis, QQQ gained 11.22%, continuing to significantly outperform DIA's -0.67%. Nasdaq fell only 0.19% on Monday, showing resilience compared to the retracement of most cyclical sectors, indicating that the market still relies on technology heavyweights to 'stabilize the index' at elevated levels.

Market breadth continued to weaken. SPY rose 1.31% over two weeks, while RSP fell 1.06% during the same period, widening the gap between market-cap-weighted and equal-weighted indices. DIA also showed short-term adjustment signals, shifting from positive to negative. Traditional heavyweight stocks and broader components faced heavier pressure. The index correction was not deep, but structural weakness became more apparent, reinforcing the characteristic of 'a few heavyweights propping up the index.'

In terms of style, growth still dominates. SPYG gained 8.69% over three months, significantly outperforming SPYV’s 0.90%, making growth the stronger mid-term allocation direction. Meanwhile, MAGS’ two-week gains increased from 0.63% to 1.84%, reflecting some recovery in the short-term momentum of leading tech stocks. Even as the market begins to reassess the impact of oil prices and geopolitical shocks, capital has not systematically exited growth; instead, it tends to first reduce exposure to traditional sectors more sensitive to the macro environment.

Pressure on the cyclical direction was more direct. XLI fell 1.14%, XLB dropped 1.36%, while XLE managed to rise 0.92% against the trend. On the same trading day, the market simultaneously priced in ‘oil price shocks raising costs and suppressing cyclicals’ and ‘energy being relatively beneficial.’ Traditional pro-cyclical sectors did not strengthen alongside energy but were weighed down by concerns over growth and costs.

III. Market Sentiment

VIX closed at 18.29, rising 7.65% in a single day. The increase in volatility indicates that developments in the Middle East and the rebound in oil prices have re-entered risk pricing, but around 18, it reflects 'more caution' rather than 'panic.' The market’s condition is closer to adding protection at high levels rather than complete de-risking.

The CNN Fear & Greed Index stood at 63, down from the previous reading of 66, retreating from the greed zone. The cooling sentiment corroborates the index correction, indicating that risk budgets are starting to tighten in the high-level phase. However, this reading has not yet fallen into the fear zone, and there is no consistent withdrawal of funds—instead, it appears that standards are being raised, concentrating on fewer, more certain directions.

The options market provided similar signals. As of Cboe's 15:15 CT snapshot, 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 index options reading was significantly higher than equity options, indicating rising institutional demand for protection at the index level; however, the equity options Put/Call ratio remained low, suggesting that risk appetite at the individual stock level had not completely faded. Considering VIX, the CNN Fear & Greed Index, and Put/Call ratios, the market seems to be contracting 'broad-spectrum risk' while retaining the willingness to pursue localized high-elasticity opportunities.

IV. Market Scan

1. Index ETFs:Index ETFs pulled back overall, but the hierarchy of strength was clear. QQQ fell 0.19%, showing relative resilience, SPY dropped 0.45%, IWM declined 0.68%, and DIA fell 1.10%. Technology-heavy stocks were steadier, while the Dow and small caps were more sensitive to oil prices and macro disturbances. Monday was not a typical all-out risk-off scenario but more akin to funds retreating from traditional heavyweights and cyclicals to pivot towards core weights better able to withstand disturbances.

2. Industry sectors:Sector performance displayed a typical 'oil price shock' structure. XLE rose 0.92% to lead gains, while XLB fell 1.36% and XLI dropped 1.14%, lagging behind. Energy benefited from rising crude oil prices, while materials and industrials faced more pronounced pressure, reflecting market concerns over rising costs and global growth. The technology sector did not show strong offensive momentum but remained relatively stable compared to most cyclical sectors, continuing to play a defensive role with its weighting.

3. Seven major tech companies:The overall performance of the seven major tech stocks was weak but not disorderly. TSLA rose 0.43%, showing relative strength, while AAPL fell 1.18%, making it the weakest performer. AAPL experienced profit-taking after a sharp rise in the previous session due to earnings results, indicating that short-term incremental support has slowed. TSLA's relative stability suggests continued interest in high-elasticity directions. Overall, the tech sector on Monday focused more on 'stabilizing its position' rather than driving a broad-based rally.

4. Chinese concept stocks:Chinese concept stocks lacked a unified direction. BABA rose 1.35% to lead gains, while PDD fell 1.94%, lagging behind. Most other stocks oscillated around the flatline. In general, Chinese concept stocks neither demonstrated clear defensive attributes like heavyweight tech stocks nor showed distinct independent catalysts like the crypto-related chain. Instead, they exhibited individual stock divergence and waning trading enthusiasm.

5. Cryptocurrencies:Bitcoin rose 1.12%, but market attention was more focused on proxy crypto assets with direct policy catalysts. CRCL surged 19.89%, MSTR climbed 7.08%, while RIOT only gained 0.97%. This indicates that the crypto-related sector is not experiencing a broad-based rally; funds are favoring potential beneficiaries of stablecoin legislation and Bitcoin proxy assets rather than indiscriminately chasing mining stocks and related targets.

$S&P 500 Index (.SPX.US)$ $SPDR S&P 500 ETF (SPY.US)$ $NASDAQ 100 Index (.NDX.US)$ $Invesco QQQ Trust (QQQ.US)$ $Dow Jones Industrial Average (.DJI.US)$ $State Street® SPDR® Dow Jones Industrial Average® ETF Trust (DIA.US)$ $Russell 2000 Index (.RUT.US)$ $iShares Russell 2000 ETF (IWM.US)$ $Roundhill Magnificent Seven ETF (MAGS.US)$ $USD (USDindex.FX)$ $U.S. 10-Year Treasury Notes Yield (US10Y.BD)$ $iShares 20+ Year Treasury Bond ETF (TLT.US)$ $XAU/USD (XAUUSD.CFD)$ $SPDR Gold ETF (GLD.US)$ $CBOE Volatility S&P 500 Index (.VIX.US)$ $CME-Bitcoin RR Futures (MAY6) (BTCmain.US)$ $iShares Ethereum Trust ETF (ETHA.US)$ $NVIDIA (NVDA.US)$ $Tesla (TSLA.US)$ $Meta Platforms (META.US)$ $Amazon (AMZN.US)$ $Alphabet-C (GOOG.US)$ $Microsoft (MSFT.US)$ $Apple (AAPL.US)$

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