Explosive Ceasefire, Nvidia Shows ‘Spark’, Dimon Eyes Exuberance

U.S. and Iranian forces apparently exchanged military strikes over the weekend even as the two sides worked to hammer out a deal that would ultimately bring a close to the fighting in the region. U.S. Pres. Donald Trump indicated late last week that the two sides were close to an agreement. But it seems that the two sides still cannot find common ground on winding down Iran’s nuclear weapons program and the timing or scale of pulling back on U.S. sanctions against the terrorist state.

CENTCOM (U.S. Central Command) released information late Sunday/early Monday that U.S. warplanes had attacked Iranian military radar sites and drone control facilities on Qeshm Island and Gorik in the Iranian province of Hormozgan on both Saturday and Sunday. These attacks came after Iranian forces had shot down a US MQ-1 drone and had launched a larger attack against Kuwait. U.S. naval forces also shot down two Iranian drones that posed a threat to civilian tankers in the Strait of Hormuz.

Both Brent and WTI Crude futures are trading higher through the zero-dark hours in response to this news. So far, the news has not negatively impacted U.S. equity index futures, which continue to move at least moderately higher coming off of last week’s record levels. These markets, at least for now, must believe that the U.S. and Iran are still discussing this “memorandum of understanding” that would lift both Iran’s threat against the Strait of Hormuz and the U.S. naval blockade of Iranian ports. The obviously fragile ceasefire would be extended while a 60-day window would open where the above-mentioned far-pricklier issues could be discussed further.

The Superchip

Early on Monday morning, Nvidia (NVDA) unveiled the Nvidia RTX Spark. This is a new superchip, designed for AI, content creation, and gaming. The chip is said to reinvent the abilities of PCs driven by Microsoft’s (MSFT) Windows operating system. According to reports, the new chip will position Nvidia and Microsoft to compete directly against the likes of Apple (AAPL), Qualcomm (QCOM), Intel (INTC) and Advanced Micro Devices (AMD) for PC supremacy.
The new chip will debut in laptops and desktops starting this autumn. The product is a combination of a CPU and GPU, built with some help from Taiwan’s MediaTek. Both Dell Technologies (DELL) and Lenovo Group (LNVGY) have signed on to offer computers built with these new super chips.

U.S.’ China Chip Rule

But on Sunday the U.S. Department of Commerce issued new export guidance that further tries to prevent Chinese companies from accessing advanced U.S.-designed AI computer chips. The more stringent guidance states that license requirements for cutting edge semiconductor chips will apply to Chinese-headquartered companies even when these companies are operating outside of China. The new rules primarily place these restrictions upon Nvidia and Advanced Micro Devices. Neither of these companies has been modeling Chinese sales into their forward-looking guidance.

Jamie Dimon on Hype and Happiness

On Friday, JP Morgan Chase (JPM) CEO Jamie Dimon spoke from the Reagan National Economic Forum in California. In an interview with CNBC, Dimon acknowledged the AI infrastructure boom and its impact upon financial markets. Dimon said, “I view the market as exuberant. I’ve seen this before. Exuberance can go on a long time, and it’s not bad.”

America’s most important private sector banker pointed to the fact that fundamentals do support current valuations and that earnings are up more than 20% year over year. He acknowledged that many companies can boast impressive order books but did toss in some words of caution. Dimon mentioned the “hype” factor in the AI boom and that interest rates, which have been volatile, “are gravity to asset prices.”

The Past Week…

The major U.S. equity indexes ended last week at record highs as investors dealt with what appeared to be the easing of tensions between the U.S. and Iran as well as a cooler than expected inflation report for April. On the inflation front, April core personal consumption expenditure prices increased less than had been the consensus view, which was a nice change from previously released data covering inflation for the period.

Equity prices popped on Wednesday after Iranian state media reported that Iranian leadership was trying to find ways to restore commercial maritime traffic through the Strait of Hormuz to pre-war levels. By Thursday, Axios had reported that U.S. and Iranian negotiators had reached a peace deal, but that Pres. Trump had not yet signed off on it. This pushed oil prices lower yet again, as equity prices rallied.

The other positive force impacting our marketplace last week was the AI-trade. Late Wednesday, data platform provider Snowflake (SNOW) delivered a “beat and raise” quarter while announcing an AI-compute deal with Amazon (AMZN). Late Thursday, Dell technology simply blew the doors off of all expectations for both results and forward-looking guidance.

Week Ahead

What matters moving forward as markets enter a holiday shortened four-day workweek…

The Geopolitical: With the U.S. and Iran supposedly still talking to each other while also shooting at each other, anything is possible. Obviously, crude oil prices and interest rates are riding on whatever outcome is eventually realized while equity prices continue to sport a certain level of optimism.

Macro: The macroeconomic focus this week will be on the Bureau of Labor Statistics’ release of two labor market surveys this Friday for the month of May. That is what traders and investors will likely wait on all week. Ahead of that release, the ISM Manufacturing Survey for May will hit publication later this morning, while the ISM Services Survey for May will cross the tape on Wednesday morning.

The Federal Reserve: The Fed will be out in public again this week, but to a lesser degree. The headliners this week will be Cleveland Fed Pres. Beth Hammack and Dallas Fed Pres. Lorie Logan who will speak on Tuesday morning and Wednesday afternoon respectively. Both of these regional Fed presidents hold policy voting rights for 2026. The Fed will also release its updated Beige Book this Wednesday afternoon.

Earnings: First-quarter earnings season in its closing stages. This will not be a very heavy earnings week. But there will be several headline-level names that will release their posting quarterly numbers as the week progresses. On Tuesday evening, Palo Alto Networks (PANW) and Ulta Beauty (ULTA) will post their results. Come Wednesday, we’ll hear from Macy’s (M), Broadcom (AVGO) and CrowdStrike (CRWD). On Thursday, Docusign (DOCU), Lululemon Athletica (LULU), and Planet Labs (PL) will all go to the tape.

Corporate Events: Computex 2026 will be held this Tuesday through Friday in Taipei, Taiwan. Both Nvidia and Arm Holdings (ARM) are expected to present. Microsoft will hold that firm’s Build 2026 conference in San Francisco this Tuesday and Wednesday.

The Week That Was…

Incredible. The S&P 500 posted a ninth consecutive winning week over the past four trading sessions. The beat goes on….

• The S&P 500 rallied 0.22% on Friday to close up 1.43% for the week.
• The Nasdaq Composite gained 0.2% on Friday to add 2.39% for the week.
• The Nasdaq 100 added 0.36% on Friday and a nice 2.89% for the week.
• The Russell 2000 took a 0.59% hit on Friday but gained 1.75% for the week.
• The S&P Small Cap 600 lost 0.77% on Friday but added 0.83% for the week.
• The S&P Midcap 400 gained 0.17% on Friday and 1.41% for the week.
• The Dow Transports gained 0.26% on Friday and a beefy 3.1% for the week.
• The Philly Semis gained less than a point on Friday but soared 5.14% for the week.
• The KBW Bank Index added 0.72% on Friday and 0.69% for the week.

On Friday, just two of the 11 S&P sector SPDR ETFs closed out the session in the green. Technology (XLK) ran away from the pack as the staples (XLP) and energy (XLE) had a rough day.

For the week, five of the eleven S&P sector SPDR ETFs closed out the session in the green. Technology was again the big winner followed by the materials (XLB). Energy was the big loser, followed by staples and utilities (XLU). Growth and cyclicals easily outperformed defensive sectors for the holiday-shortened week.

Earnings

As of May 29, according to FactSet, for the first quarter, Wall Street now expects to see year over year blended (results & expectations) earnings growth for the S&P 500 of 28.6%, up from 28.4% last week, and up sharply from 11.6% two months ago. This is a stunning increase in valuation experienced by our marketplace through this reporting season and underscores just how powerful a force AI-related profitability has become. Wall Street also sees revenue growth of 11.8%, up from 11.6% a week ago. With 97% of the S&P 500 having reported, 85% of companies have beaten earnings expectations, while 81% have beaten sales projections.

For the full year of 2026, the street now looks for earnings growth of 22.6%, up from 22.1% last week, and up from 14.7% two months ago, on revenue growth of 10.7%, up from 10.4% last week and up from 7.7% a rough nine weeks ago. The outlook for the second quarter is also very positive. Second quarter S&P 500 earnings growth is now estimated at 21.6%, up from 21% last week.
At the moment, technology and the communication services sectors are projected to have grown Q1 earnings a jaw-dropping 54.3% and 48.9% for the first quarter, respectively. Just one sector, health care is currently projected to have suffered a Q1 earnings contraction (-3.2%).

Valuation

Still using data provided by FactSet, the S&P 500 ended last week trading at 21.2-times 12 months’ forward-looking earnings, up from 21.1 times last week, and down from 21.6 times about nine weeks ago. This is above the five-year average of 19.9 times for the index as well as being well above its ten-year average of 18.9 times.

The S&P 500 also ended last week trading at 28.5-times trailing 12 months’ earnings, up from 28.0 times one week ago, but above levels that the index reached more than two months back. This also stands well above the five-year (24.6 times) and 10-year (23.3 times) averages for the index.

Nine of the 11 sectors are now trading at or above their five-year average valuations, led by the discretionaries (27.8 times), technology (25.3 times) and the industrials (25.0 times). Technology, and the utilities (17.9 times), health care (17.2 times) both closed out last week undervalued relative to or even with their five-year norms.

Fed Funds Futures

Fed Funds futures trading in Chicago are currently pricing in a 99% probability for no change to be made to the current target range (3.5% to 3.75) for the Fed Funds Rate at the next FOMC policy meeting on June 17. As we know, Kevin Warsh is now running the central bank, but Jerome Powell still has a say, and probably some loyalists as well. There are no rate cuts fully priced in at any point in the future looking out towards year’s end 2027. That said, there is now a rate hike priced (67% probability) in as early as January 2027.

Economics

(All Times Eastern)

09:45 – S&P Global Manufacturing PMI (May-F): Flashed 55.3.

10:00 – ISM Manufacturing Index (May): Expecting 52.9, Last 52.7.

10:00 – Construction Spending (Apr): Expecting 0.3% m/m, Last 0.6% m/m.

The Fed

(All Times Eastern)

No public appearances scheduled.

Today’s Earnings Highlights (Consensus EPS Expectations)

After the Close: HPE (.53)

At the time of publication, Guilfoyle was long NVDA, MSFT, AMD, AMZN, CRWD, PL equity. Short SNOW equity.