Author: Shenchao TechFlow

U.S. Stocks: Historic highs, but this time only technology and energy are holding up the facade

On Monday, the S&P 500 and Nasdaq once again set historic closing records, but this time, the atmosphere on-site was completely different from previous occasions.

The S&P 500 closed up 0.19%, reaching a historic high closing price of 7,412.84 points. The Nasdaq closed up 0.10%, ending at 26,274.13 points, also a historic high. The Dow Jones increased by 95.31 points (+0.19%), closing at 49,704.47, still 295 points away from the 50,000 mark, a level that has become the most stubborn threshold on Wall Street.

However, hidden within these two historic highs is a number that raises eyebrows: only 37.8% of stocks in the entire market closed up. Within the S&P 500, six sectors closed in the green while five closed in the red; the sectors that set historic highs were among the heaviest weightings of those six sectors, rather than reflecting the whole market's movement.

This pattern of "index at a new high, majority of stocks declining" has a specific name in technical analysis: negative market breadth. This doesn’t necessarily mean the market will decline immediately, but it is a signal: this round of gains increasingly relies on a few names to support the market, rather than a collective advance. Beneath the shiny exterior of the major indices, the market is quietly diverging.

The strongest sector of the day was energy (+2.63%), followed by materials (+1.43%), industrials (+1.01%), and information technology (+1.00%). However, communication services fell by 2.33%, with Alphabet's stock dropping 2.55%, dragging the entire sector into negative territory. Consumer goods fell 0.76%, as signs of consumer confidence being continually eroded by high oil prices are spreading from the University of Michigan's Consumer Sentiment Index into stock prices.

The rise in energy stocks is linked to oil prices: Brent crude rose back above $103/barrel on Monday, while WTI increased by about 2.78% to $98.07. This follows Trump's announcement on Truth Social over the weekend that he "totally rejected" Iran's proposal, leading the market to an immediate pricing of a "peace process once again delayed". Every step back in the narrative of peace sees energy stocks advance; meanwhile, consumers, manufacturers, and airlines are paying the price.

Copper prices quietly hit a historic closing high on this day, ending at $6.4605/pound, marking over a 13% rise year-to-date in 2026. The logic behind copper's rise is dual: first, the Iranian war has restricted related copper exports from the Middle East; second, the structural demand driven by AI data centers, electric vehicles, and power grid renovations. It is one of the most overlooked but potentially significant price signals in the long run.

The yield on 10-year U.S. Treasuries jumped 4.6 basis points to 4.41%, and the VIX fear index surged over 7%; placing these two numbers next to the headline of "historic highs" creates a subtle tension: the index is up, but interest rates are also up, and volatility is rising, revealing that underlying pressure is accumulating beneath the calm surface.

Late Sunday night, Trump posted on Truth Social:

"I just read the response from Iran's so-called 'representatives'. I do not like it; it is completely unacceptable!"

This was Trump's formal response to Iran's latest peace proposal submitted through an intermediary from Pakistan. Iran's conditions include: the withdrawal of U.S. forces from the Strait of Hormuz, unfreezing all Iranian assets, lifting all sanctions, acknowledgment of Iran's sovereignty over the Strait of Hormuz, and cessation of military actions against Iranian allies in Lebanon and surrounding areas.

An Iranian foreign ministry spokesperson responded at a press conference on Monday that these conditions are "generous and reasonable," describing them as "responsible regional security proposals." Iran also added a statement that led legal advisors for European tanker companies to convene quickly: any British or French warship entering the Strait of Hormuz will "face a decisive response."

During a White House meeting on Monday afternoon at 2 p.m., Trump told reporters that the ceasefire agreement is "on massive life support," describing its current state as "incredibly fragile." He stated that Iran's proposal is "totally in the wrong direction," and that there is no specific schedule for negotiations.

This moment marks the closest both countries have come to a complete rupture in relations since the Iranian war began nearly eleven weeks ago. However, the market has not collapsed due to the already tested pricing mechanism: in the absence of new actual military actions, the verbal stalemate is being treated as discounted. WTI rose from Friday’s $91 back to $98, but did not repeat the panic of $126. The market is learning the rhythm of this war.

Schwab Chief Investment Strategist Liz Ann Sonders stated in Monday's market commentary: "Given the lack of peace progress, high oil prices, and the high concentration in the tech sector, it’s hard to determine if the market has begun to self-complacent.” This is a Wall Street analyst who typically exercises great caution casually using the term "complacency."

Two Major Events Today: CPI Data and Trump's Arrival in Beijing

Today (May 12), at 8:30 a.m., the U.S. Bureau of Labor Statistics will release the consumer price index (CPI) for April. This is the most important report today and the single data point with the highest information density thus far in May.

Consensus expectations: Headline CPI month-on-month +0.6%, year-on-year +3.7% (up from March’s 3.3%); core CPI month-on-month +0.3%, year-on-year +2.7%.

Why this data is more complex than any previous CPI: This is the first CPI data since the tariffs officially took effect on April 2. From March’s energy-driven inflation (gasoline +21.2%, which significantly boosted the entire index), April’s inflation will simultaneously overlay two pressures: one, oil prices remain high (April WTI average around $98-105/barrel), and two, the tariff effects begin to infiltrate the price chains of clothing, electronic products, furniture, and automotive parts.

The market is less concerned about the headline number and more interested in the details of core CPI.

If core CPI exceeds 0.3%, especially surpasses 0.4%, this would indicate that high oil prices are penetrating non-energy goods through transportation costs and industrial product prices, marking the onset of inflation's "second-round effects" being measurable in data. For the Fed, this would entirely close any discussions of rate cuts, with Warsh’s first meeting after taking over (on June 17) set against a very uncomfortable macro backdrop.

If core CPI is mild (in the 0.2%-0.3% range) or even below expectations, it suggests that the spillover effects of high oil prices are still being absorbed within the energy sector, and the basis of core inflation remains relatively stable. The market could then revisit the likelihood of rate cuts in the second half of the year, although that probability remains extremely low.

Bank of America has completely abandoned its forecast for rate cuts in 2026, pushing the first potential rate cut window back to the second half of 2027. JPMorgan's baseline scenario is that, whether talks occur or not, inflation will remain above 3% until early 2027. Paul Gruenwald, Chief Economist at S&P Global Ratings, provided a year-end inflation forecast in a recent interview with Yahoo Finance: full-year CPI around 5%.

The differences between these three institutions reflect the real dilemma of current inflation forecasts: no one knows when the Strait of Hormuz will reopen, and all numbers are based on conditional probabilities involving an unknown variable.

The second major event today: Trump arrives in Beijing. He brought along a 16-member business delegation, including Elon Musk, Tim Cook (Apple), Sundar Pichai (Google), Sam Altman (OpenAI), and others. The public items on the agenda are trade and rare earth elements, but what the market is really waiting for are two items: first, a bilateral agreement on the AI regulatory framework; if the U.S. and China can reach even a framework agreement on AI safety testing and data sovereignty, the semiconductor and AI application sectors will undergo a new narrative reassessment; second, whether China is willing to exert pressure on Iran. China is Iran's largest oil buyer and the biggest dependent on the Strait of Hormuz; if Beijing signals a demand for Tehran to reopen the strait, it could serve as the strongest external push in the entire peace process.

Oil Prices and Gold: Ceasefire "on massive life support," $100 is the new psychological floor

Brent crude closed on Monday near $103, while WTI closed at $98.07, marking the second rebound since last week's drop from $126 highs. The blockade of the Strait of Hormuz persists, and Chevron's CEO's words still hold true; even if an agreement is reached, normalizing supply will take months.

However, today’s focus is not on the absolute level of oil prices, but rather their momentum. From $99 on May 6 (with the "one-page memo" expectations) to $103 on May 11 (after Trump's rejection of the proposal), Brent rebounded 4% within four days. This elasticity tells the market that each retreat in peace expectations leads to oil prices quickly filling most of the decline. $100 is no longer a peak; it’s a floor.

Gold maintained a range between $4,700-4,720 on Monday, continuing the sideways pattern seen in recent weeks. The rise in U.S. Treasury yields to 4.41% is the main suppressing factor, as the opportunity cost of holding under high rates continues to dampen gold's rebound momentum. After today's CPI data is released, if inflation exceeds expectations → the dollar strengthens → gold is pressured; if inflation is mild → rate cut expectations revive slightly → gold may have room to rebound. Gold is an invisible polling station for today's CPI data.

Cryptocurrency: $82K remains that door, GitLab's transformation reflects industry anxiety

On Monday, Bitcoin traded in a range between $81,000-82,000, failing to effectively break through $82,228 (the 200-day moving average). Ethereum is around $2,400, with the global crypto market cap maintained at approximately $2.70 trillion; the fear and greed index is in the 52-55 range (neutral).

The data confirmed by CryptoQuant last week remained valid on Monday: $81,486 is the average cost basis for short-term holders and is also the current densest selling pressure zone for Bitcoin. Shorts have set up a barrier here, with bulls facing resistance anytime they approach.

Today (May 12), the CPI data will directly impact the in-trade movements of cryptocurrencies. Historical experience shows that if CPI exceeds expectations → risk assets immediately decline → Bitcoin faces short-term pressure; if CPI is below expectations → minor revival of rate cut expectations → Bitcoin might test above $82,000. However, regardless of the outcome, $83,700 (the average cost for spot ETF holders) is the price Bitcoin truly needs to surpass and hold to demonstrate that institutional buying has transitioned from "unrealized losses" to "unrealized profits," thereby unlocking the next upward movement channel.

Yesterday after trading hours, there was an industry message worth noting. GitLab announced a strategic restructuring after trading: layoffs, geographical coverage reduction, and management cuts, shifting the company's focus from traditional DevOps (developer operations tools) to Agentic AI. This is another mid-sized SaaS company publicly acknowledging, following Shopify, during earnings season: "The methods we relied on in the past are being disrupted by AI, and we need to rebuild from the inside out." CEO Bill Staples wrote in an internal letter: "This is a structural migration of our entire code base and way of working; it is not just an optimization, but a transformation."

This narrative, similar to what Suzi Feng mentioned about "Agentic AI driving CPU demand," and what Amodei referred to regarding "the SaaS moat disappearing," represents another perspective on the same issue: a software company actually in the midst of it, using layoffs and strategic shifts to turn a theoretical proposition into a timestamped business reality.

Today's Summary: Historic high has only 30% of stocks participating; today CPI reveals the truth

On May 11, both the S&P 500 and Nasdaq hit historic highs, but less than 40% of stocks in the market closed up, indicating that the divergence at the signal level is more noteworthy than at the price level.

U.S. stocks: S&P 500 closed at 7,412.84 (+0.19%), Nasdaq at 26,274.13 (+0.10%), both are historic highs. Energy +2.63% led the gains, while communication services -2.33% led the declines, with Alphabet down -2.55%. Copper hit a historic high of $6.4605. The yield on 10-year U.S. Treasuries rose to 4.41%, and VIX rose 7%. The market breadth is extremely poor (only 37.8% of stocks rose), which is the most alarming internal signal in this seven-week rebound.

Iran/Oil prices: Trump announced that he "completely rejects" Iran's proposal; Brent rose back to $103, and WTI climbed to $98.07. The ceasefire agreement is described as "on massive life support," and the peace process timeline is once again empty.

Cryptocurrency: Bitcoin traded sideways in the $81,000-82,000 range, unable to break the resistance at $82,228 (200-day moving average). GitLab's restructuring focus on Agentic AI is the latest public case of pressure on AI transformation within the SaaS industry.

The most important question today: What will the April CPI tell us?

If core CPI exceeds 0.3%, it indicates that high oil prices have begun to penetrate into non-energy goods; Warsh’s policy space after taking over the Fed will be more limited than anyone anticipated; the stock market will face pressure at high levels, and Bitcoin will encounter short-term selling pressure. If core CPI is mild, the March energy shock receives some mitigation in April, and rate cut expectations slightly revive, tech stocks may still have upward space.

In addition, Trump is landing in Beijing today. If there are substantial results regarding AI regulatory frameworks or rare earth supply at the end of the summit, the semiconductor sector will face a narrative reassessment tomorrow. If China clearly states its willingness to pressure Iran to reopen the Strait of Hormuz, it would be a more significant external signal than any one-page memo.

At least as of yesterday, one thing has been confirmed: a historic high with only 30% of stocks participating is the kind of historic high that requires the utmost caution.