Wall Street Daily (May 6): US stocks hit new highs again on Tuesday as energy disruptions eased temporarily and market risk appetite reopened; the main upward momentum shifted to small-cap and high-beta sectors, with continued enthusiasm in crypto

Summary: US stocks continued to rise on Tuesday, with the S&P 500 up 0.81%, Nasdaq up 1.03%, Dow Jones up 0.73%, and Russell 2000 up 1.75%. All four indices closed higher, with Nasdaq and Russell 2000 showing the strongest performance. The market was not solely supported by a few mega-cap stocks; small-caps and high-beta sectors also contributed simultaneously. The VIX dropped to 17.38, falling 4.98% in a single day, with the volatility premium brought by Middle Eastern tensions from the previous trading day retreating significantly. The most important pricing change of the day was the continued decline in oil prices, with crude oil down 2.34%, shifting the market focus back to corporate earnings and risk expansion. Meanwhile, Bitcoin rose 1.30%, maintaining the heat in the crypto space. In terms of sector performance, technology was the strongest while communications lagged behind. Regarding major asset classes, the US Dollar Index rose 0.02%, gold increased by 0.73%, crude oil fell by 2.34%, and Bitcoin rose by 1.30%.

I. Major Events

1. Temporary easing of Middle East oil price shocks brings the earnings-driven trend back into focus

The disturbance in the Middle East on Monday had pushed oil prices sharply higher, but crude oil retreated noticeably on Tuesday, closing down 2.34% locally. As the energy shock subsided, the market refocused on the main theme of stronger-than-expected corporate earnings in Q1. The S&P 500 rose 0.81%, Nasdaq gained 1.03%, Russell 2000 climbed 1.75%, and the VIX dropped 4.98%, giving risk assets more room for expansion. However, capital still flowed preferentially to sectors with solid earnings and higher elasticity.

2. ISM Services slowdown keeps dovish trading in check

The April ISM Services PMI fell to 53.6, with new orders dropping significantly, but price components remained high. The coexistence of slowing growth and sticky prices made it difficult for the market to simply extrapolate the decline in yields as a 'full bet on rate cuts.' The simultaneous occurrence of index record highs, VIX declines, and sentiment recovery reflected that funds preferred tech, small-caps, and high-beta assets rather than indiscriminately lifting all interest-rate-sensitive areas.

3. Palantir raises guidance, AI software valuation threshold continues to rise

Palantir's Q1 revenue increased by 85% year-on-year, and the company raised its full-year revenue guidance to between $7.65 billion and $7.662 billion. Fundamentals continue to strengthen, but PLTR still fell 6.93% on Tuesday, indicating that high growth alone is not sufficient to support the continued expansion of high-valuation software. The AI theme remains strong, but the market's expectations for quality results are rising, deepening the pricing divergence within the tech sector.

II. Major Trends

Technology remains the strongest short-to-medium-term focus. Over a two-week period, QQQ rose 5.79%, significantly higher than SPY's 2.80% and DIA's 0.69%; over a three-month horizon, QQQ climbed 14.31%, continuing to significantly outperform DIA's 1.21%. The Nasdaq hit another new high on Tuesday, showing that technology heavyweights are still the core driving force behind index gains, and have returned from 'relative resilience' in the previous session to active leadership.

The recovery in small caps is starting to catch up, indicating that risk appetite is spreading outward. IWM's two-week increase rose from 0.19% to 2.93%, with a three-month gain of 10.64%, surpassing SPY's 7.10%. This aligns with the Russell 2000's 1.75% rise on Tuesday, suggesting that the market is no longer solely supported by a few mega-cap stocks, and funds are willing to allocate risk budgets to more elastic areas.

Breadth improvement remains limited. SPY gained 7.10% over three months, while RSP only increased by 2.80%; over a two-week timeframe, SPY was up 2.80%, while RSP only rose 0.34%. Index highs do not equate to widespread gains, as large-cap stocks still noticeably pull the index. The current market trend resembles 'structural risk appetite recovery' rather than a broad-based bull market.

Growth style continues to dominate. SPYG rose 11.25% over three months, significantly higher than SPYV's 2.65%. Even as falling oil prices reopened risk appetite, incremental capital still flowed preferentially into growth and technology rather than value defense. Although the materials sector strengthened simultaneously on Tuesday, the core price momentum remains in the hands of growth assets.

III. Market Sentiment

The VIX closed at 17.38, down 4.98% in a single day. The rapid decline in volatility reflects that the risk premium brought by Monday's geopolitical shock has significantly contracted, but levels near 17 are still not in an extremely optimistic range. The current state is not one of emotional overbuying but rather the market re-engaging with risk assets while maintaining some macro caution.

The CNN Fear & Greed Index stood at 67, up from the previous 62, returning to a greed-leaning zone. This change corroborates the new highs in indexes, strength in small caps, and recovery in high-beta assets, indicating that risk budgets are indeed expanding. However, this reading has not yet entered an extremely optimistic area; sentiment improvement appears more like a rebound rather than overheating.

Options data also shows a recovery in risk-taking, but hedging demand has not disappeared. As of the Cboe snapshot at 15:15 CT, the total Put/Call ratio was 0.71, the index options Put/Call ratio was 1.06, and the equity options Put/Call ratio was 0.59. The lower Put/Call ratio in equity options suggests faster recovery in risk appetite at the individual stock level; the index options Put/Call ratio above 1 indicates institutions are participating in the rally while retaining index protection. Combining VIX, CNN Fear & Greed Index, and Put/Call ratios, the current market is in a state of 'recovering risk appetite, but macro hedging remains present.'

IV. Market Scan

1. Index ETFs:Index ETFs closed higher across the board, with IWM leading the pack at a 1.68% increase, followed by QQQ at 1.30%, SPY at 0.84%, and DIA at 0.69%. Both technology and small caps strengthened simultaneously, showing that risk appetite not only returned on Tuesday but also began to spread from large-cap weights to more elastic sectors. The smallest increase in DIA also reflects that traditional weights are playing more of a follower role rather than leading this rebound.

2. Industry sectors:Among the sector ETFs, XLK led with a 2.21% increase, followed by XLB with a 1.74% rise, while XLC lagged behind with a 0.40% decline. Technology has once again become the strongest sector, materials are supported by a recovery in risk appetite, and the communication sector appears relatively weak. This combination shows that when capital reopens its risk budget, it prefers sectors offering both earnings certainty and flexibility, rather than evenly allocating across all sectors.

3. Seven major tech companies:The divergence within the Magnificent Seven tech stocks remains clear. AAPL led with a 2.66% gain, while NFLX lagged behind with a 3.44% drop. Apple continued its strong performance post-earnings report, further supported by news of supply chain diversification, as consumer tech and cash flow certainty continue to receive premium valuation. Netflix's weakness against a strong market reflects that the tech sector is not experiencing a broad-based rally, and funds are still scrutinizing the alignment between quality realization and valuation.

4. Chinese concept stocks:Chinese ADRs overall failed to keep up with the strength of the Nasdaq and small-cap indices. FUTU was the strongest with a 0.75% increase, while JD lagged with a 1.20% decline, and most other names fluctuated around the flatline. Although risk appetite has rebounded, cross-market diffusion remains insufficient, suggesting that Chinese ADRs currently exhibit individual stock differentiation rather than a unified beta recovery.

5. Cryptocurrencies:Bitcoin rose 1.30%, and RIOT surged 8.94%, indicating continued upward momentum in the crypto space. Riot's earnings report and AMD's expansion news reinforced the dual narrative of 'mining rigs + data centers,' showing that funds are not merely following Bitcoin price fluctuations but also pricing in the expansion capacity of computational infrastructure. Meanwhile, PLTR fell 6.93%, reflecting the market's strict requirements for high-valuation AI software monetization, with high-beta funds favoring exposure to the crypto and computational power chains.

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

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