Stocks had a solid week. The S&P 500 finished at 7,473, up 0.88 percent on the week and 9.17 percent for the year. The Nasdaq did even better, up 1.22 percent and now 16.76 percent year to date. Technology is still driving this market and that is not changing anytime soon. What really stood out last week was the Russell 2000 surging 2.72 percent. When small caps show up like that it usually means the rally has real legs. It is not just a handful of mega cap stocks holding everything up.
The volatility picture is genuinely supportive right now. The VIX fell almost 10 percent last week to 16.70 and the MOVE index, which tracks bond market volatility, also pulled back to 78.4. Both are calm. That is exactly the environment where you want to be holding long call options because you get the full benefit of any upside move without the premium getting eaten by rising volatility. The 10 year Treasury held at 4.57 percent and the yield curve is steepening, which is real money for JPM's net interest margin every single quarter.
On commodities, WTI crude fell 8.37 percent last week to 96.60 dollars. That matters because oil pulling back removes the biggest inflation tail risk that was keeping the Fed nervous. Lower oil makes it more likely that rates stay where they are or come down, which is good for growth stocks and good for bank spreads. Gold softened slightly to 4,521 dollars, which fits the risk-on mood. The dollar went basically nowhere at 99.32. No big currency moves means no headwind on company earnings. The one number worth putting a circle around is the financials sector down 4.68 percent year to date while technology is up 25.45 percent. That 30 point gap does not stay that wide forever and it is the entire reason JPM is in the portfolio.
| Instrument | Close | 1W Chg | YTD Chg |
|---|---|---|---|
| Rates | |||
| US2Y | 4.08% | -1bps | +61bps |
| US10Y | 4.57% | -2bps | +39bps |
| 2s10s | 49bps | -1bps | -22bps |
| MOVE | 78.4 | -1.80% | +22.62% |
| Equities | |||
| SPX | 7473.5 | +0.88% | +9.17% |
| NDX | 29481.6 | +1.22% | +16.76% |
| RUT | 2869.2 | +2.72% | +15.61% |
| XLF | 51.94 | +1.64% | -4.68% |
| XLE | 59.49 | +0.08% | +33.93% |
| XLK | 180.39 | +2.34% | +25.45% |
| XLY | 119.18 | +2.27% | +0.01% |
| XLP | 84.80 | +0.19% | +9.78% |
| FX | |||
| DXY | 99.32 | +0.05% | +1.06% |
| EURUSD | 1.1621 | -0.35% | -1.07% |
| USDJPY | 159.02 | +0.40% | +1.67% |
| Credit | |||
| HYG | 79.91 | +0.57% | +1.10% |
| LQD | 108.37 | +0.47% | -0.15% |
| Commodities | |||
| WTI | 96.60 | -8.37% | +68.23% |
| Gold | 4521.0 | -0.76% | +4.52% |
| Copper | 6.3420 | +1.45% | +12.65% |
| Vol | |||
| VIX | 16.70 | -9.39% | +11.71% |
Stocks had a solid week. The S&P 500 finished at 7,473, up 0.88 percent on the week and 9.17 percent for the year. The Nasdaq did even better, up 1.22 percent and now 16.76 percent year to date. Technology is still driving this market and that is not changing anytime soon. What really stood out last week was the Russell 2000 surging 2.72 percent. When small caps show up like that it usually means the rally has real legs. It is not just a handful of mega cap stocks holding everything up.
The volatility picture is genuinely supportive right now. The VIX fell almost 10 percent last week to 16.70 and the MOVE index, which tracks bond market volatility, also pulled back to 78.4. Both are calm. That is exactly the environment where you want to be holding long call options because you get the full benefit of any upside move without the premium getting eaten by rising volatility. The 10 year Treasury held at 4.57 percent and the yield curve is steepening, which is real money for JPM's net interest margin every single quarter.
On commodities, WTI crude fell 8.37 percent last week to 96.60 dollars. That matters because oil pulling back removes the biggest inflation tail risk that was keeping the Fed nervous. Lower oil makes it more likely that rates stay where they are or come down, which is good for growth stocks and good for bank spreads. Gold softened slightly to 4,521 dollars, which fits the risk-on mood. The dollar went basically nowhere at 99.32. No big currency moves means no headwind on company earnings. The one number worth putting a circle around is the financials sector down 4.68 percent year to date while technology is up 25.45 percent. That 30 point gap does not stay that wide forever and it is the entire reason JPM is in the portfolio.
I assign ~65% probability to continued grinding upside through June option expiry. The AI capex supercycle is the dominant macro narrative and it has legs — MSFT, META, and AMZN have each committed $60-80B in annual capex anchored to NVIDIA supply, and none of that demand is going away. The Bull/LowVol regime means momentum continues to work and dips are for buying.
Base case (~65%): NVDA earnings beat on Wednesday confirms Blackwell Ultra demand — the stock moves +8-12% and our $220C triples. META Connect June 4 adds a second catalyst. By June 20 expiry, all three calls are deep in-the-money and we close at 3-5× premium. JPM grinds +3-5% into Q2 earnings in mid-July as the rates setup becomes consensus. Bull case (~20%): NVDA gaps +15%+ on earnings with raised guidance. The AI narrative re-accelerates. XLF starts closing the 30-point gap to XLK. Portfolio return exceeds 200% on options premium. META Connect produces a hardware catalyst that wasn't priced. Bear / tail case (~15%): NVDA misses on margin guidance or provides weak Q3 outlook. Vol spikes, our calls go to near-zero. Max loss on options: $862 (NVDA) + $705 (AMZN) + $1,724 (META) = $3,291 if all three expire worthless. JPM is unaffected (equity position with defined stop at $291). This scenario requires a fundamental breakdown in AI capex narrative — which I view as low probability given visible committed spending.