The US market: review and forecast for May 18. The external background promotes sales

Our comments and expectations

External political agenda will be one of the key drivers during the upcoming session. The day before, U.S. President Donald Trump wrote on his social media Truth Social that “time is running out for Iran” and that it should “move urgently.” Tomorrow, the White House head will hold a meeting with senior national security advisors regarding further military actions against the Islamic Republic.

Tensions in the region remain. A drone damaged an electric generator on the territory of the Barakah nuclear power plant in the UAE; fortunately, radiation levels remained normal. Saudi Arabia reported the interception of three UAVs launched from Iraqi territory. The Strait of Hormuz remains closed, which, according to IEA estimates, is driving an unprecedented pace of reduction in global oil inventories, which by the end of May may approach historic lows of around 7.6 billion barrels.

A meeting of G7 finance ministers and central bank governors will take place in Paris on May 18–19, with the key topic being the impact of the Middle East conflict on the global economy. Amid continued concerns over inflationary pressure driven by energy shortages, yields on long-term sovereign bonds of major economies have reached multi-year highs. An additional factor of repricing has been the market positioning in anticipation of a policy shift under the Federal Reserve’s new chairman Kevin Warsh.

The Monday macroeconomic calendar contains no major releases. The May New York Fed Services Business Activity Index will be published (previous reading: -14 points), which may have a limited impact on investor sentiment.

U.S. equity futures are moving lower. The risk balance for the upcoming session is assessed as negative amid elevated volatility due to the ongoing rally in oil prices, Washington’s tightening rhetoric toward Iran, and pressure from rising Treasury yields. We expect S&P 500 movements in the range of 7350–7450 points.

Main premarket highlights

· Baidu (BIDU) shares are up more than 2% after a strong quarterly report. Revenue from Baidu Core’s AI segment increased by 49% y/y, accounting for more than half of core business revenue. The Apollo Go autonomous service also contributed, completing 3.2 million autonomous rides in the reporting period (+120% y/y).

· China committed to purchasing at least $17 billion of U.S. agricultural products in 2026–2028, in addition to previously agreed soybean import volumes, and to continue bilateral consultations on lifting restrictions on U.S. meat imports. This news may impact agri-industrial sector valuations.

· The upcoming IPO of SpaceX, which remains in the focus of investors, attracted additional attention amid reports of talks with BlackRock (BLK) to purchase $5–10 billion worth of shares.

· The threat of a strike by 47,000 employees of Samsung Electronics, the world’s largest DRAM and NAND memory chip producer, creates risks for global semiconductor supply chains and for the valuation of Micron (MU) and Sandisk (SNDK). A South Korean court partially upheld the company’s claim, ordering the union to ensure uninterrupted production. Wage negotiations have entered their final phase.

· NextEra Energy (NEE) and Dominion (D) are in merger talks that could create a $400 billion company.

· Mizuho Financial (MFG) shares fell up to 1.8% after denying a Yomiuri Shimbun report about an investment decision in Rakuten Bank. Management clarified that it is only considering various options, including the mentioned one.

· The rise in Bio-Rad Laboratories (BIO) shares was driven by news that activist fund Elliott Investment Management has taken a “significant” stake in the company.

· A lawsuit has been filed in the U.S. District Court in Seattle against Amazon (AMZN) seeking reimbursement of overpaid amounts due to higher import prices caused by Trump tariffs, which were ruled unconstitutional by the Supreme Court.

Market the day before

Trading on May 15 on U.S. stock exchanges closed in negative territory. S&P 500 lost 1.24%, NASDAQ 100 fell 1.54%, Dow Jones declined 1.07%, and Russell 2000 dropped 2.44%.

The main pressure on the market came from profit-taking in the overheated segment of AI-related stocks amid technical overbought signals. A global rise in bond yields also contributed to the sell-off. The negative backdrop was reinforced by the lack of progress in resolving the Iran conflict and mixed outcomes of talks between Donald Trump and Xi Jinping: investors received no concrete signals regarding the development of relations between the two countries.

The “Magnificent Seven” stocks ended the session mixed. The indices were supported by gains in Microsoft (MSFT: +3.05%) after Bill Ackman announced that Pershing Square (PSUS: -0.74%) had taken a position in the company with a “highly attractive fundamental valuation.” Semiconductor stocks experienced a sharp correction. The SOX index lost 4%. The largest sell-off was seen in NVIDIA (NVDA: -4.42%) and Tesla (TSLA: -4.75%).

The energy sector (XLE: +2.36%) was the top performer, and the only sector to end the day in positive territory, supported by oil prices exceeding $105 per barrel. Materials (XLB: -2.65%) and utilities (XLU: -2.29%) were among the worst performers, affected by the sharp rise in Treasury yields.

The New York Fed Manufacturing Activity Index (Empire State) for May rose to 19.6 points (consensus: 7.5, April: 11), the highest level since April 2022. New orders and shipments subindices improved significantly, while paid and received price components reached four-year highs, indicating persistent inflationary pressure. Industrial production in April increased by 0.7% m/m (consensus: 0.3%), with March revised upward by 0.2 percentage points.

Treasury yields rose by 7–12 bps on the session, with a weekly increase of 18–25 bps. The 2-year UST yield reached a 14-month high, and the 10-year reached a 12-month high. Accelerating inflation and rising energy costs forced a major repricing of Federal Reserve policy expectations: where easing was previously priced in, tightening is now expected over the next year. WTI oil rose by 4.2%, while safe-haven assets saw broad sell-offs: gold fell 2.6%, silver plunged 9.1%, and bitcoin futures declined 2.9%.

Company news

· POET Technologies (POET: -22.36%) reported a quarterly loss and announced the placement of 19 million shares and an equal number of warrants to a single institutional investor at a combined price of $21. This creates dilution risk for existing shareholders. The CFO’s resignation later this year added further negative pressure.

· Fermi (FRMI: -11.67%) amended its charter. Changes require approval of at least 70% of outstanding shares to alter board size and composition. The decision comes amid a conflict with a former CEO claiming control of about 40% of capital and intending to install an alternative five-member board.

· Infleqtion (INFQ: -10.95%) reported a reduction in loss per share and revenue growth, but its annual guidance of “at least $40 million” was effectively in line with consensus ($39.9 million). Elevated expectations were not met.

· Nu Holdings (NU: -5.72%) reported quarterly results below consensus. Weakness was driven by lower gross margins and adverse changes in the credit portfolio structure. Management emphasized that underlying business fundamentals are more stable than reflected in headline figures.