The stock market slipped back into an "AI only" trade last week, with the major stock indices again propelled higher by Information Technology (XLK +3.8%). The S&P 500 (SPX) featured some volatility, but was able to add 0.6% and finish at an all-time high. That marked the fourth consecutive weekly gain for the index. Still, volume on the SPDR S&P 500 ETF (SPY) was light and at its lowest weekly total since Christmas, an obviously quiet trading week. The Nasdaq was up 1.5% and the Nasdaq 100 (QQQ) added 2.4%. In just four weeks, the SPX has jumped 12.5%, the Nasdaq 18.6%, and the QQQ 18%. That is the strongest four weeks for the SPX since May 2025, and the best stretch for the Nasdaq and QQQ since stocks were coming out of COVID-19. Excluding the pandemic, it was the best four weeks for the Nasdaq and QQQ since March 2009.

Despite bursts of outperformance, small- and mid-cap stocks (SMID) have underperformed large-caps year to date -- as they have over the past six years. But they may be in a better position to generate market-beating returns going forward. SMID companies tend to focus on domestic markets, so their businesses could be less disrupted by the trade and tariff debate, fallout from unrest in the Middle East, the Russian invasion of Ukraine, issues in China, or other geopolitical developments. As well, the prices of SMID stocks generally are lower than the prices of large-caps, with the P/E ratio on the Russell 2000 SmallCap Index at 20, compared to a trailing P/E of 29 for the S&P 500. Finally, there are long stretches in the record books when SMID stocks have outperformed large-caps. SMID risks do carry risk, but diversified investors look to have exposure to small- and mid-caps based on the long-term performance record.

On Monday, stock futures opened lower as the energy markets rallied in overnight trading from Sunday -- so the tenor coming into a new week remained downtrodden. But that changed dramatically around 7:00 a.m. when President Trump delivered market-turning news, as if he was a technical chartist who knew things were about to get ugly. Indeed, he posted on Truth Social that the U.S. and Iran have held talks and, as a result, he was no longer planning imminent strikes on Iranian power plants and energy infrastructure. That led to a rally in S&P 500 (SPX) futures of about 260 points and a concurrent plunge in WTI (by $15/barrel). The Iranians quickly denied everything and the SPX futures finished with a 1.1% gain after giving back 115 points the rest of the day. WTI finished off 9.4% at $89. The SPX ran out of gas right at the declining 10-day exponential moving average (EMA) and was back above its 200-day average -- but lost that, closing for a third straight session under this key average. The Nasdaq 100 (QQQ) also ran into a ceiling from its 10-day EMA and posted its second straight session under the 200-day. So we are left with another day when it was hard to know if the session was more positive than negative, or vice versa. At least for a day, consumer stocks led the charge, with durable household products, furnishings, recreational services, auto parts, home construction, and home-improvement retailers posting strong gains. Those industries have been smashed over the past five weeks. The indices are still teetering on shaky support, with the last hope being the 50-week (at 6,483 for the SPX and at 576 for the QQQ). (Mark Arbeter, CMT)

Stocks are higher at midday on Tuesday. Now that oil prices are easing, stocks are finding their way higher. The yield on the 10-year note has edged down two basis points and is at 4.11%. Crude oil is at $85 per barrel, while the VIX volatility index is just under 23.