Wall Street Brief (May 19): US stocks diverged at highs on Monday, with high interest rates continuing to weigh on growth stocks, but the market did not panic further; the Dow edged up slightly, while sectors like energy, defense, and finance outperformed relatively

Summary: US stocks diverged at highs on Monday, with the S&P 500 down 0.07%, Nasdaq down 0.51%, Dow Jones up 0.32%, and Russell 2000 down 0.65%. Capital continued to reduce exposure to high-valuation tech and high-beta assets, pressuring the Nasdaq and small caps. The VIX fell to 17.82, a daily decrease of 3.31%, and market sentiment did not shift further into panic. The most important event of the day came from Iran: Trump postponed the planned military strike, leaving room for negotiations, and extreme risks did not escalate. Meanwhile, supply disruptions remained unresolved, crude oil rose 1.31%, and sectors such as energy, defense, and finance strengthened. In terms of major asset classes, the US Dollar Index fell 0.27%, gold rose 0.61%, crude oil rose 1.31%, and Bitcoin fell 1.22%.

I. Major Events

1. Trump postpones military strike on Iran

Pricing around the situation in Iran saw significant fluctuations on Monday. Earlier, Trump warned that there was 'not much time' for negotiations with Iran, raising market concerns over prolonged risks in the Hormuz region. Later, Trump stated that at the request of regional allies, the planned military strike for Tuesday had been postponed, leaving room for serious negotiations. This was the real major event of the day. Supply risks were not resolved, so the energy sector remained strong; however, military actions did not escalate immediately, and extreme risk aversion did not spread further. The VIX instead retreated to 17.82.

2. NextEra plans to acquire Dominion

NextEra Energy plans to acquire Dominion Energy in an all-stock deal valued at approximately $66.8 billion, forming one of the largest electric utilities in the United States. The backdrop for this deal is the combined surge in US electricity demand driven by AI data centers, manufacturing reshoring, and power infrastructure investment. While this news didn't directly determine the direction of the indices that day, its industrial significance was notable. AI-driven demand continues to spill over from chips, networks, and computing power into the power infrastructure, and capital expenditure logic for generation, transmission, storage, and grid assets is being repriced. On Monday, the Utilities sector (XLU) rose just 0.16%, failing to become the main trading theme; however, the market’s pricing of AI has now extended into longer-chain infrastructure segments.

II. Major Trends

At the index level, Monday was not a one-sided decline but rather a high-level divergence. The Dow Jones rose by 0.32%, the S&P 500 fell slightly by 0.07%, Nasdaq dropped by 0.51%, and Russell 2000 fell by 0.65%; among ETFs, DIA performed strongest with a 0.33% increase, while IWM was weakest with a 0.59% drop. Capital is still willing to be allocated to equities, but it prefers sectors with stable cash flows and lower valuation pressures.

The medium-term structure remains biased towards large-cap growth, but breadth has not improved significantly. Over a two-week horizon, QQQ gained 4.90%, SPY increased by 2.87%, while RSP only rose by 0.58%; over a three-month period, QQQ surged by 16.67%, SPY climbed 7.92%, and RSP barely moved, rising only 0.05%. Market-cap weighting and growth stocks remain at the core of the mid-term rally; equal-weight portfolios have yet to form an effective following.

In terms of style, growth continues to lead, albeit with higher short-term volatility. SPYG gained 13.17% over three months, significantly higher than SPYV's 2.14%; MAGS rose 12.60%, surpassing XMAG's 4.12%. The pullback in technology on Monday does not signify a complete reversal of the medium-term trend but rather a repricing amid geopolitical risks, interest rates, and high valuations.

III. Market Sentiment

The VIX closed at 17.82, falling 3.31% on the day. Despite continued declines in Nasdaq and small caps, the lack of a corresponding rise in the VIX indicates that market risks have not spiraled further out of control. Investors appear to be making structural adjustments rather than panic-driven selling. The CNN Fear & Greed Index stands at 63, unchanged from the previous reading, remaining in the greedier range. Sentiment has neither deteriorated significantly nor heated up further. This represents an uncomfortable equilibrium: major indices have not collapsed, but high-flying tech and high-beta assets have started to be selectively realized.

In terms of CBOE Put/Call ratios, the total Put/Call ratio was 0.80, with index options at 0.91 and equity options at 0.69. The equity options segment remains skewed toward risk-taking, while hedging demand in the index segment is not extreme. Overall, the market has not shifted into defensive mode, but capital is dispersing from previously crowded areas into energy, defensive sectors, and some non-tech industries.

IV. Market Scan

1. Index ETFs:Differentiation within index ETFs continues. The Dow ETF DIA rose by 0.33%, performing relatively strongest, the S&P 500 ETF SPY was nearly flat, the Nasdaq 100 ETF QQQ fell, and the Russell 2000 ETF IWM dropped by 0.59%, making it the weakest performer. The underperformance of small caps reflects lingering concerns about financing costs and economic resilience.

2. Industry sectors:In sector performance, Energy XLE led gains with a 1.92% rise, followed by Consumer Staples XLP up 1.49%, Financials XLF up 1.25%, and Real Estate XLRE gaining 1.20%; Technology XLK lagged behind, falling 1.08%. This combination suggests that funds have not completely exited risky assets but are reducing concentrated exposure to highly-valued tech names, shifting instead to energy, defensive sectors, and financials. On a sub-sector basis, Oil Services OIH surged 3.04%, Medical Devices IHI climbed 2.72%, and Cybersecurity CIBR advanced 2.37%. The relative strength and momentum improvement in IHI, OIH, medical devices, and aerospace-defense related sectors deserve more attention.

3. Seven major tech companies:Performance diverged within the Magnificent Seven tech stocks. Netflix NFLX led gains with a 3.02% rise, Microsoft MSFT climbed 0.38%, and Google GOOG slipped slightly by 0.05%; NVIDIA NVDA fell by 1.33%, while Tesla TSLA dropped 2.90%, being the weakest. Tech is not universally stalling, but investors are becoming more selective toward high-beta AI hardware and high-volatility growth names, still favoring individual stocks with strong independent fundamentals.

4. Chinese concept stocks:Chinese stocks saw localized recovery. Tencent Music TME surged 6.97% to lead gains, Bilibili BILI climbed 2.94%; Futu FUTU fell 2.18%, relatively lagging. Overall, this is not a full return of risk appetite for Chinese stocks, but rather a selective rebound in fundamentally and valuation-supported names after prior pullbacks.

5. Cryptocurrencies:Bitcoin fell 1.22%, continuing weakness across the crypto chain. MicroStrategy MSTR plunged 6.08%, MARA dropped 2.09%, and Circle CRCL declined 2.29%. Even as the VIX retreated, crypto assets failed to recover significantly, indicating that this space is still treated as a high-beta risk asset; when tech and small caps face pressure, crypto-linked stocks also struggle to rally independently.

$S&P 500 Index (.SPX.US)$ $SPDR S&P 500 ETF (SPY.US)$ $NASDAQ 100 Index (.NDX.US)$ $Invesco QQQ Trust (QQQ.US)$ $Dow Jones Industrial Average (.DJI.US)$ $State Street® SPDR® Dow Jones Industrial Average® ETF Trust (DIA.US)$ $Russell 2000 Index (.RUT.US)$ $iShares Russell 2000 ETF (IWM.US)$ $Roundhill Magnificent Seven ETF (MAGS.US)$ $USD (USDindex.FX)$ $U.S. 10-Year Treasury Notes Yield (US10Y.BD)$ $iShares 20+ Year Treasury Bond ETF (TLT.US)$ $XAU/USD (XAUUSD.CFD)$ $SPDR Gold ETF (GLD.US)$ $CBOE Volatility S&P 500 Index (.VIX.US)$ $CME-Bitcoin RR Futures (JUL6) (BTCmain.US)$ $iShares Ethereum Trust ETF (ETHA.US)$ $NVIDIA (NVDA.US)$ $Tesla (TSLA.US)$ $Meta Platforms (META.US)$ $Amazon (AMZN.US)$ $Alphabet-C (GOOG.US)$ $Microsoft (MSFT.US)$ $Apple (AAPL.US)$

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