U.S. Futures & World Markets

Stocks are taking it on the chin again this morning as yesterday's weakness spills over into another session. The Nasdaq dropped 1.3% on Monday and is getting hit again premarket as investors channel their inner Rod Tidwell, getting nervous around AI spending and the return on that investment. (Had to include the clip.)

SpaceX isn't doing the market any favors as Musk is reportedly headed to the bond market to raise additional capital as infrastructure spending continues to balloon. The AI arms race has been great for revenue growth, but investors are beginning to wonder whether some companies are spending like drunken sailors.

Asian markets, which have been a major beneficiary of the AI trade, are feeling the pain as well. South Korea's Kospi index was down 10% overnight, triggering a trading halt. The Kospi had been on an absolute tear year-to-date as speculators used leverage to drive up asset prices. When leverage drives markets higher, it also works in reverse. The growing popularity of leveraged ETFs only pours gasoline on the fire.

Corporate share buybacks have been a tailwind for stocks in years past, but that game has changed. Instead of returning cash to shareholders, capex spending is now off the charts. Bloomberg summed it up well: of the four biggest AI spenders, only Microsoft bought back shares in the first quarter — and its $3.4 billion in repurchases was the lowest total in nearly a decade.

S&P Futures vs. Fair Value: -90.00  |  10-Year Yield: 4.49%

CORE Headlines

Charts & Data

History of asset bubbles — today looks nothing like 1998/99. Alpine Macro via Daily Chartbook: a chart placing the current AI-era rally in historical context alongside prior speculative episodes. The fundamental underpinnings remain materially different.

Q2 rebalancing: institutions estimated to sell up to $165 billion in equities by quarter-end — highest in at least 4 years. The Kobeissi Letter via JPMorgan: Japan's GPIF (~$1.9T AUM) estimated to sell ~$60B in equities; Norway's Norges Bank (~$2.1T) expected to sell ~$40B; US defined benefit pension funds (~$9.6T) could account for another ~$55B; Swiss National Bank ~$25B. "A massive quarter-end rebalancing wave is about to hit global markets." A mechanical flow headwind into month-end that has nothing to do with fundamentals.

CTAs long ~$96B of global equities — forecast to continue adding length in the absence of a material selloff. Robbie Stankard, Goldman Sachs via Daily Chartbook: "In the absence of a material selloff, flow forecasts indicate CTAs will continue to add length globally." Systematic buyers remain a tailwind if the tape stabilizes.

Fewer than 60% of S&P 500 stocks trading above their 50-DMA — weak breadth signal. @bluekurtic via Daily Chartbook: "This is not a sell signal but rather a sign of weak market breadth. In this regime, $SPX has annualized at -17.5%." Not a timing call, but a structural caution flag worth monitoring.

Consolidated equity positioning at 42nd percentile — far from crowded. Deutsche Bank via Daily Chartbook: "Still far from crowded and leaving plenty of room for further upside." The positioning backdrop remains constructive even as sentiment softens.

Hedge funds modestly net sold US equities after 4 straight weeks of buying. Robbie Stankard, Goldman Sachs via Daily Chartbook: "Financials, Consumer Discretionary, Real Estate, and Communication Services were the most net bought. Info Tech, Industrials, Health Care, and Staples were the most net sold." The rotation toward value and cyclicals continues.

Retail ETF flows into semiconductor ETFs hit a new high last week. Simon White, Bloomberg via Daily Chartbook: "Retail traders are going full tilt into the market, and especially into semis ETFs." When you run out of incremental buyers, the sellers take charge.

SOX logged 9 days with 5%+ gains in the last 60 sessions — only seen at major tops or depths of bear markets. Jonathan Krinsky, BTIG via Daily Chartbook: a sobering data point about the velocity of recent semi moves. Extreme volatility in either direction is often a warning sign.

"What's changing isn't the fundamental story — it's the market structure." Lee Coppersmith, Goldman Sachs via Daily Chartbook: "Leverage continues to build, and volatility across large-cap Tech continues to expand relative to the broader market even as prices move higher." The risk is structural, not fundamental.

When Tech leads, S&P 500 delivers its highest annualized returns at 44.7%. @bluekurtic via Daily Chartbook: "Technology is currently outperforming every other sector, and that's bullish for the market." A historically strong signal — even if the ride is bumpy.

Small-cap stocks just hit new 52-week highs relative to large-caps. All-Star Charts via Daily Chartbook: the breadth expansion story continues beneath the surface. Small-cap outperformance is a healthy sign for the broader market, even when headline indices are choppy.

Forward P/E for META, AMZN, GOOGL, and MSFT near multi-year lows — de-rated since ChatGPT launched. @ljkawa via Daily Chartbook: "The group has de-rated since the launch of ChatGPT." The biggest AI beneficiaries are actually cheaper on earnings than they were before the AI era began. That's the bull case in a single data point.

At today's record margin levels, the model would point to ~23x earnings — market is trading 1.5 standard deviations below its long-term regression trend. Duality Research via Daily Chartbook: the market is cheap relative to its own profitability history. Either margins are about to collapse, or stocks are undervalued.

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This content does not constitute legal, tax, accounting, or other professional expert advice. Everything published is believed to be reliable, but its accuracy or completeness is not assured. Past performance does not indicate future results. The opinions expressed herein are subject to change without notice and are solely those of the author as of the date indicated.