The Rally Survived. Barely

👋 ICYMI

This week delivered the kind of whiplash that defines 2026. On Thursday, the S&P 500 closed above 7,500 for the first time and the Dow Jones reclaimed the 50,000 milestone — both posting fresh all-time highs as optimism around the Trump-Xi summit in Beijing and strong earnings propelled equities higher.

Then Friday happened. A global bond rout sent the 30-year Treasury yield surging to 5.12% — the highest closing level since 2007 — while the 10-year yield jumped to 4.59%, its highest in a year, and stocks sold off sharply.

For the week, the S&P 500 still managed a slight gain of roughly 0.3%, while the Nasdaq slipped into negative territory and the Dow finished down marginally. The seven-week winning streak for the S&P 500 is intact — barely — but the complexion of the rally changed on Friday.

The Trump-Xi summit in Beijing dominated geopolitical headlines. Trump spent two days with Xi Jinping, accompanied by 16 top U.S. executives including Nvidia $NVDA ( ▼ 4.42% ) CEO Jensen Huang. Trump touted "fantastic" trade deals and said China would purchase U.S. oil, sending ships to Texas, Louisiana, and Alaska. Treasury Secretary Bessent told CNBC that China will use its influence to help reopen the Strait of Hormuz, calling it "very much in their interest". But no major breakthroughs were announced, Xi warned that mishandling Taiwan could lead to "an extremely dangerous situation," and Trump returned warning he would "not be much more patient" with Iran.

🔁 Market Movers

• 📈 S&P 500 Breaks 7,500, Dow Reclaims 50,000 — Before Friday's Selloff

  Thursday was a milestone day: the S&P 500 closed at 7,500+ and the Dow hit 50,063 for the first time, driven by optimism around the Trump-Xi summit and strong retail sales data. Friday erased those gains as a global bond rout and profit-taking in semiconductors sent the S&P 500 down 1.24% and the Dow back below 50,000. Market breadth deteriorated despite the index still trading near highs.

• 💰 30-Year Treasury Yield Hits 5.12% — Highest Since 2007

  The 30-year yield breached 5.1% on Friday, the 10-year climbed to 4.59%, and the 2-year pushed above 4.0%. The move wasn't just a U.S. story — global bonds sold off simultaneously, with U.K. gilts and Japanese government bonds also surging. Analysts cited sticky inflation, the lack of a Trump-Xi breakthrough, incoming Fed Chair Kevin Warsh's unknown policy stance, and fears that the Fed is behind the curve.

• 🇨🇳 Trump-Xi Summit: Oil Deals, Taiwan Tension, No Iran Breakthrough

  Trump and Xi agreed that the Strait of Hormuz must remain open. China committed to buying U.S. oil. Boeing received a 200-plane order — underwhelming by investor expectations. Roughly 10 Chinese companies were approved to purchase Nvidia's H200 chips, a partial thaw in export controls. But Xi warned about Taiwan and no major trade agreements materialized. The summit was "more atmospherics than substance," as one strategist put it.

• 🧠 Cerebras IPOs at $185, Surges 68% on Day One

  AI chipmaker Cerebras Systems $CBRS ( ▼ 10.08% ) began trading on the Nasdaq at $350 after pricing its IPO at $185 — a 68% first-day pop that marked the biggest AI-related IPO since CoreWeave's $CRWV ( ▼ 6.05% ) debut in March 2025. The stock then fell 10% on Friday as the broader tech selloff hit newly public names hardest. Cerebras competes directly with Nvidia in the AI training chip market.

• 📊 Earnings Season: Record Profit Margins, 81% Beat Rate

  With 454 S&P 500 companies having reported, 81% have beaten on EPS and 73% on revenue. EPS growth is tracking at 25.1% and revenue growth at 10.5%. The blended net profit margin of 14.7% would be the highest since FactSet began tracking in 2009. Earnings are not the problem. Valuation and rates are the debate.

👀 Signals I'm Watching

• 🔍 The Bond Market Is the New Boss

  Friday's yield spike was not a one-off — it was a message. The 30-year at 5.12% reprices mortgage rates, corporate borrowing costs, and equity valuations simultaneously. If yields stay here or move higher, the high-growth AI stocks that led the rally are the most vulnerable. Schwab noted that higher yields aren't necessarily a bull market killer, but the velocity of the move matters — and breaking to fresh cycle highs is significant.

• 🤖 Nvidia Earnings Wednesday: The Biggest Single-Stock Event of the Year

  Nvidia reports Q1 earnings on May 20. CEO Jensen Huang travelled with Trump to Beijing. China's chip market access was partially restored. The semiconductor index (SOX) is up 65% year to date — Burry compared this week's chart to the run-up before the March 2000 dot-com crash. If Nvidia delivers, the rally could extend despite yields. If it disappoints, the profit-taking that started Friday could accelerate into something more serious.

• 📈 Bill Ackman Buys Microsoft

  Pershing Square founder Bill Ackman disclosed on Friday that his fund is taking a stake in Microsoft $MSFT ( ▲ 3.05% ) — a notable signal given that MSFT fell 4% on earnings two weeks ago and has been the Mag 7's "laggard" this year. Ackman joining the Microsoft shareholder base is a contrarian bet that Azure's 40% growth and $190 billion capex guide are being underappreciated.

• 🛢 China Buying U.S. Oil Could Reshape Energy Flows

  Trump's announcement that China will send ships to Texas for U.S. oil is potentially significant for global energy trade. China is the world's largest crude importer, and nearly all of Iran's exports go to Beijing. If China shifts purchasing toward the U.S. and away from Iran, it tightens the pressure on Tehran while creating a new revenue stream for U.S. producers. Watch for follow-through in the weeks ahead.

⚠️ Red Flag to Note

Higher for Longer Just Got Real

The 30-year Treasury yield closing at its highest level since 2007 is not just a market statistic — it's a regime signal. Mortgage rates are climbing back toward 7%. Corporate borrowing costs are rising. And the Federal Reserve, under new Chair Kevin Warsh, has given no indication that cuts are imminent. The market rallied for seven straight weeks on the assumption that the war would end, inflation would fade, and rates would eventually come down. Friday's bond rout challenges all three of those assumptions simultaneously. Q1 earnings have been strong enough to absorb higher rates so far — but at a forward P/E of 21x and a 30-year yield above 5%, the margin for error is razor thin. The next test arrives Wednesday with Nvidia.

🔍 Insider Transactions I’m Watching

📬 Closing Note

On Thursday, the S&P 500 closed above 7,500. The Dow hit 50,000. Record earnings. Record profit margins. A historic summit between the world's two most powerful leaders.

On Friday, the bond market reminded everyone who's actually in charge.

The 30-year yield at 5.12% isn't just a number on a screen. It's the cost of borrowing for every business, every homebuyer, and every government in the world. When that number moves this fast, everything else has to adjust.

But here's the important nuance: the equity market didn't crash. The S&P 500 fell 1.24% and still finished the week slightly positive. Earnings are growing 25%. Profit margins are at generational highs. And the AI buildout — which Nvidia will update the world on Wednesday — shows no signs of slowing.

The risk is not that the rally is built on nothing. It's built on real earnings. The risk is that rates are repricing faster than earnings can grow, and the market is running on fumes of optimism about a peace deal that doesn't exist yet and rate cuts that aren't coming.

Nvidia on Wednesday. That's the next verdict.

Stay patient. Stay selective. And let the data guide the story.

Until next Sunday —

George ☕