CWS Market Review – May 19, 2026

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For the third day in a row, the Nasdaq closed lower than where it had been the day before. Also, for the third day in a row, the Nasdaq trailed the overall market.

Normally, this is a fairly benign event. This time, however, it’s notable because the tech sector has been phenomenally strong for so long that any weakness, even minor stuff, gets my attention.

There’s a growing chorus on Wall Street that’s eager to declare this market a bubble. Maybe, but that’s a game I try to avoid. However, I will concede that if there were a bubble, this is pretty much how I’d expect it to begin.

What do I mean by that? Let’s start with the bond market. Historically, the bond market leads the stock market by a few months—usually around six months, sometimes more, sometimes less, but almost always, it’s first.

Lately, the bond market hasn’t looked so good. You can tell when investors run screaming from safe assets and plunge head-first into risky ones that everything might not be so kosher. That’s been the story of the last six weeks, and it may be unwinding.

Things are changing, albeit slowly. Indeed, yields on longer-dated Treasuries have been creeping higher. The yield on the 10-year Treasury is getting close to 4.7%. In February, it was under 4%. The yield on the 30-year Treasury is the highest it’s been since 2007.

At some point, investors will wonder if it’s easier to park their money in a safe Treasury and make a boring 4.7% versus riding a chaotic and overpriced stock market. The volatility doesn’t bother me much, but I know it bothers some investors, and it doesn’t take much to trigger a sector rotation.

Here’s a look at the Long-Term Treasury ETF (TLT):

Strategists at Barclays and Citigroup both said that the 10-year yield could hit 5.5%. That would be a big deal. We haven’t seen these levels in over 20 years.

Think of the financial markets as an endless tug-of-war between safe and secure bonds versus riskier stocks. You know something’s up when one side completely creams the other, and that’s what’s happened this year. Stocks soared and bonds did nothing. Now the attractiveness of bonds is starting to show.

It doesn’t end there. Higher yields will also cause problems for the Federal Reserve. A good way of guessing what the Fed will do is to keep an eye on the two-year Treasury yield. The two-year yield has a habit of doing whatever the Fed does, just a little bit sooner.

The two-year yield has drifted up to 4.1%. Meanwhile, the Fed’s current range for interest rates is 3.5% to 3.75% (see below). This suggests that the market is putting pressure on the Fed to hike rates. Of course, it doesn’t mean that the Fed will follow, but the market doesn’t like being ignored.

As far as interest rates go, for now, the futures market is a doubter. The latest futures prices see the Fed hiking rates once before the end of the year. President Trump has said he wanted to see rates go down to 1%. I’m not so sure he’ll get his wish.

Tomorrow, the Fed will release the minutes from its most-recent meeting. The Fed minutes is normally the dullest report you can possibly imagine, but this new one might actually be a tiny bit interesting. That’s because there were four dissenting votes in the last policy statement.

I should explain that the Fed hates dissension. Even where there’s disagreement, the Fed will often defer to whatever the Fed chairman wants while making their objections known privately. One or two dissenting votes is rare but four is highly unusual. It’s the most dissenting votes in 34 years.

The other issue is that Jerome Powell is hanging around at the Fed, but not as chairman. Kevin Warsh has officially taken over that role. Could the Fed gradually have, in effect, competing Fed chairs? What happens if most members of the FOMC follow what Powell advocates instead of Warsh? It could happen. There’s no rule that says they can’t.

There’s also no rule that says that stocks and bonds can’t move in opposite directions, and that’s what we’ve seen. Not only do we see this risk divided between the markets, but we also see it within the markets. For example, value stocks have finally perked up after being trounced for so long by growth stocks.

Boring stocks are suddenly in. If you recall in last week’s issue, I told you about Sprouts Farmers Market. The stock gapped up 6.5% after the last earnings reports. Well, it didn’t stop there. The stock gained 3.5% yesterday, plus it was up over 7% today before it pulled back. SFM is now up 30% off last month’s low.

Beyond the optimistic earnings report, nothing has changed with SFM. It’s just that investors are finally more welcoming to stocks like Sprouts.

Weakness at the Big Boxes

This morning, we got a report that homebuilder confidence rose in May, but that’s coming off a steep low. The housing market is still soft, and many homebuilders are cutting prices to keep their sales going.

The report on pending home sales also increased by a bit, but here, too, there are some growing problems just under the surface. The major problem is affordability, and many potential buyers have been priced out of the market. Rising energy prices have also been a factor as that takes a big bite out of consumers’ finances.

Home Depot (HD) reported its earnings earlier today. In my mind, this is probably a better report on how the economy is really doing than most government reports.

For the three months ended on May 3, HD said that its same-store sales rose by just 0.6%. That’s not so hot. If more Americans are upgrading their homes, that’s a good signal of future growth. Home Depot’s CFO, Richard McPhail, said, “There’s no question that the average consumer is feeling pressure from rising fuel costs.”

On the plus side, HD maintained its full-year guidance, but I can assure you that higher rates will not help HD’s business. More earnings from the big box boys are to come. Target (TGT) reports tomorrow and Walmart (WMT) reports on Thursday.

Fly Me to the Moon…

At some point in the next few weeks, SpaceX will have its initial public offering. This has caused confusion for many on Wall Street.

On one hand, the company is obviously massively overpriced, but that calculation is based on conventional evaluation models and with Elon Musk, as usual, we’re dealing with something highly unconventional.

So the question is, how can you value SpaceX at all? One fact we’ve learned is that betting against Elon Musk has proved to be a risky proposition.

The company doesn’t have a ticker symbol yet, but SPCX seems to be the front runner. There’s also no IPO date yet, but rumors say it could be as early as June 12. Another possibility is June 28 which is Elon’s birthday. There’s also talk of the company having a five-for-one split ahead of the IPO.

We do know that after the IPO, Musk will own around 40% of the outstanding shares. Moreover, he has said that he has no plans to sell any stock. This means that if the company is given a value of say $1.5 to $2 trillion, that would make Musk the world’s first trillionaire. By trillionaire, we mean a person who is a millionaire one million times over.

For now, FOMO, the fear of missing out, seems to have overridden everything. No one wants to be left behind, especially when it involves Elon Musk.

Bank of America has already developed a basket of 35 stocks that are tied to the emerging space market. Of course, the connection that many of these companies have can be very faint. As long as it says “space” in their business models, investors will be interested.

I’m a fan of SpaceX, but I can’t say that I’m an eager investor. I’d love to be proven wrong.

That’s all for now. There will be no newsletter next week. I’m taking off in honor of Memorial Day. We’ll be back on June 2 with our next issue of CWS Market Review.

– Eddy

Posted by on May 19th, 2026 at 6:13 pm


The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.