In 30 seconds: US equity markets hit new records with the S&P 500 crossing 7,400 and the Nasdaq posting its fastest-ever 1,000-point milestone, fueled by blowout Q1 earnings and surging AI-driven capital expenditure from major tech firms, even as bond market stress and rising real rates pose risks. Ahead of Trump's upcoming Beijing summit, analysts debate US leverage over China as courts limit IEEPA tariff authority, the administration pivots toward Section 301 cases, and a Phase 1-style purchase commitment deal appears to be the primary negotiating goal. Oil markets are under significant pressure as the US enforces a naval blockade against Iran, disabling tankers and seizing shadow-fleet vessels, driving gasoline crack spreads sharply higher and raising fears of a sustained supply shock.
S&P 500: 7,400. The Nasdaq Composite moved from 25,000 to 26,000 in less than a week, the fastest 1,000-point milestone on record. For context, the S&P 500 sat at 5,600 a year ago, 4,200 5 years ago, and 2,100 10 years ago. Earnings growth has been a notable feature of this period. Since profits bottomed in 2023, growth rates have run 11% in 2024, 13% in 2025, and now 22% for calendar year 2026. The broader secular regime dates to 2009, now 17 years old. Google CapEx spending is up 467% over the last three years. Microsoft CapEx spending has risen 367%, Amazon CapEx spending 211%, and Meta CapEx spending 178%. Nvidia structured a deal with IREN in which IREN paid full price for chips and also gave Nvidia $750 million worth of warrants. Corpay $PAY jumped 10% after notching its second triple play in three quarters, while Cloudflare $NET cratered 24%, the worst earnings reaction-day in its history. Meanwhile, the bond market bears watching. Real rates are rising, as are inflation expectations via the TIPS market. Nothing good happens above 4.5% for the 10-year. The S&P 500's gains came with negative breadth, a pattern that has become the norm these days.
Trump heads to Beijing on 14-15 May needing something he can frame as a win — a deal with China he can sell as a victory at home, especially before the November 2026 US midterm elections. The irony is that the limits on the Administration's leverage versus China right now are largely self-imposed. It doesn't want to upend the Busan truce, it wants licences for rare earth imports, it wants new purchases of beans and Boeings. Meanwhile, the legal scaffolding for broad tariffs is under strain. The administration's lawyers should have anticipated the court's reading of the 122; the fact that they didn't expect the courts to look back to the 70s was a legal error. None of this eliminates the China-specific toolkit. The NYT headline framing the '122' decision as a setback for the US in negotiations with China is wrong — the actual setback is to any attempt to generate a global tariff; there are a ton of other ways to tariff China. It is difficult to find legal authority to do across the board tariffs without Congress, but it is easy to build strong section 301 cases against China. There are at least four solid 301 cases against China: an easy revival of the legacy 301 as China didn't live up to its purchase commitments, which were a partial settlement of the underlying tech transfer and IP theft complaint. A currency 301 modelled on the case USTR brought against Vietnam under Lighthizer could claim that Chinese state bank intervention holds down China's currency and thus burdens US commerce. The trade picture itself is not cooperating with the narrative. Despite record tariff levels, the US trade deficit is widening in large part because of the boom in AI-related investment. Because measured trade with China is down so much, tariff revenue from China hasn't gone up much. The bulk of the increase in tariff revenue now comes from the rest of the world. In March, the simple effective tariff on China sat at a bit over 20% while the rest of the world faced just 5%. The combined trade surplus of chip superpowers (Korea and Taiwan) is up $300 billion above its 2024 level. Taiwan's April surplus was down a bit due to oil and gas imports, but it didn't change the overall story.
The US naval blockade of Iran is no longer an abstraction you can price around. A U.S. Navy F/A-18 Super Hornet from USS George H.W. Bush (CVN 77) disabled both unladen tankers after firing precision munitions. The Ocean Koi has operated as part of the Iranian shadow fleet since at least 2020. The futures curve tells you exactly how the market wants to feel about all this. WTI front-month sits at $109 while the WTI 9-month forward trades at $75. That structure is backwardation, and the consensus read is optimistic: the market is concluding that the forward price is "right" and the spot price is temporary. This is the glass-half-full interpretation. The glass-half-empty interpretation is that the spot price is right and the forward price is wrong, and you are about to find out which. The physical market is already voting. The physical oil market has turned around, and the US gasoline crack spread is WAY above the norm, currently tracking 2022's trajectory. That is the kind of warning that sounds measured until it isn't. The deeper problem is structural. The US consumer represents 65% of GDP, and an oil spike forces a binary: save the bond market (print money into an oil spike) or save the currency (let inflation bid yields until bond and stock markets, and western economies all break). Neither option is pleasant.
Here is what moved this week.
S&P 500: 7,398.93, up 0.84% on the day
Gold: $4,730.90, up 0.66% on the day
US Dollar (DXY): 97.87, down 0.38% on the day
WTI crude: $94.82, up 0.01% on the day
Gas (per gallon): $4.45, up 7.98% on the week
Initial jobless claims: 200,000, up 5.26% on the week