Good Afternoon. It took 24 hours for the broadening rally to remember that geopolitics still matter. Iranian drones attempted to hit U.S. troops in Kuwait overnight; U.S. forces responded with strikes on Iran's Qeshm Island. The Dow gave back yesterday's record close and then some. The labor market sent a soft signal too: ADP private payrolls came in at 122,000, well below the prior month.

—Rosie, Wyatt, Evan & Conor

🔥 What’s Hot: 🔥

🥶 What’s Not: 🥶

The News: The Dow Jones Industrial Average declined roughly 1.2% Wednesday, surrendering the gains that produced Tuesday's record close. The S&P 500 fell 0.7% and the Nasdaq declined almost 0.9%. Energy was the only S&P sector in positive territory; cybersecurity, alt asset managers, and consumer discretionary were the heaviest decliners. The 10-year Treasury yield climbed back above 4.46% as IEF fell 0.3%, marking the rare session in which both stocks and bonds declined together.

Why It Matters: For investors, the simultaneous decline in stocks and bonds is the classic 2022 setup — when inflation expectations rise faster than growth expectations. The breakeven inflation rate (TIPS spread) climbed 6 basis points to 2.45%. For consumers, mortgage rates will follow Treasury yields higher; the 30-year fixed has already retraced 15 basis points off last week's low.

What to Watch: Friday's nonfarm payrolls report — the only catalyst this week capable, outside of peace in the middle east, of pulling stocks and bonds back into their usual inverse correlation.

Source: Investopedia

The News: ADP's National Employment Report showed U.S. private employers added just 122,000 jobs in May, well below April's revised gain and a touch under economist forecasts. The leisure and hospitality category drove most of the upside; manufacturing payrolls were flat. Annual pay growth held at 4.4% — slightly hotter than wage trackers expected. The report sets up Friday's Bureau of Labor Statistics nonfarm payrolls number with consensus at roughly 145,000 jobs.

Why It Matters: For investors, the disconnect — soft hiring with sticky wages — is the worst combination for bond markets. It implies inflation pressure without growth tailwind, which is why yields climbed today. For consumers, sticky 4.4% pay growth means the wages-to-prices spiral hasn't fully resolved; the Federal Reserve's September rate-cut window may close if Friday confirms today's signal.

What to Watch: Friday morning's BLS report, especially the average hourly earnings figure, which the Federal Reserve weights more heavily than ADP's pay measure.

Source: CNBC

The News: Palo Alto Networks shares declined roughly 6.9% Wednesday to around $276.62 despite reporting fiscal Q3 revenue of $3.0 billion (up 31% year-over-year) and non-GAAP EPS of $0.85 — beating consensus on both. Management raised full-year guidance and announced a record remaining performance obligation (RPO) of $20.9-21.0 billion. The selloff was tied to questions about hardware-versus-software revenue mix, integration risk from recent acquisitions, and disappointing Zscaler guidance late Tuesday that pulled the entire sector lower. CrowdStrike reports tonight; the stock declined 4% into the release.

Why It Matters: For investors, the "sell the news" response on a beat-and-raise quarter is a warning that buy-side expectations have run well ahead of even the strong fundamentals. Cybersecurity multiples — Palo Alto at 60x forward earnings, CrowdStrike at 90x — leave very little margin for any disappointment. For consumers, the broader narrative of "AI raises the cyber bill" still holds; expect higher costs for cyber insurance and enterprise security software in 2027.

What to Watch: CrowdStrike's net new annual recurring revenue (ARR) — anything below $300 million would extend the cybersecurity decline through the rest of the week.

Source: Tickeron

The News: Macy's shares advanced roughly 2.3% Wednesday after the company reported its strongest first-quarter comparable sales performance in four years and raised its full-year guidance. Revenue rose to a level beating consensus, gross margin expanded by 110 basis points, and the company narrowed its inventory-to-sales ratio to the lowest level since 2019. The retailer specifically called out strength in fragrance, jewelry, and fine apparel — categories Macy's had been ceding to off-price competitors. The board also reauthorized an additional $1 billion in share repurchases.

Why It Matters: For investors, a department-store comp turnaround that holds for three consecutive quarters historically generates 50-80% stock returns over the next 12 months — the playbook Ralph Lauren and Tapestry followed in 2024. For consumers, Macy's strength signals that the upper-middle-income consumer is still spending; the squeeze is on lower-income discretionary categories, which Dollar General and Walmart will confirm next week.

What to Watch: Whether Kohl's and Nordstrom can replicate the comp improvement when they report in three weeks. Department-store breadth, not just one name, would change the sector narrative.

Source: TheStreet

The News: The Institute for Supply Management's May Services PMI registered at 54.5%, holding above 54 for the third consecutive month and marking six straight months of services-sector expansion. New Orders came in at 56.1, Employment registered 52.8, and Prices Paid moderated to 58.2 from 60.1 in April. The reading was particularly notable given the soft ADP employment data released a few hours earlier — services hiring is slowing but services demand is not.

Why It Matters: For investors, services-sector strength alongside soft goods-sector data fits the "soft landing with sticky inflation" framework. Services account for roughly 70% of GDP, so any reading above 53 generally rules out recession. For consumers, services inflation — rents, healthcare, insurance, dining — is the part of the basket the Federal Reserve has struggled most to bring under control; sustained services-sector strength means those line items stay elevated.

What to Watch: The Federal Reserve's June meeting summary of economic projections — services-sector resilience may push the Fed's terminal rate dots up by 25 basis points.

Source: PR Newswire / Institute for Supply Management

The News: West Texas Intermediate crude advanced 2.7% Wednesday to around $96.25 a barrel and Brent climbed 2.5% to $98.35 after a series of overnight escalations between the U.S. and Iran. U.S. Central Command reported that Iranian drones attempted to target American troops in Kuwait, and that U.S. forces responded with strikes on Iran's Qeshm Island in the Persian Gulf. Iranian state media also claimed strikes on infrastructure in Bahrain. The April ceasefire framework, already strained Monday and Tuesday, now appears to be holding by a thread.

Why It Matters: For investors, the oil price is doing the work the Fed Funds rate used to do — tightening financial conditions through energy costs. Each $5 sustained move higher in Brent shaves roughly 0.2% off U.S. GDP growth over the following four quarters. For consumers, U.S. wholesale gasoline futures have advanced 11% this week alone; retail pump prices typically lag by 10-14 days, so expect a measurable jump at the pump by mid-June.

What to Watch: The Strait of Hormuz tanker traffic data — Lloyd's List publishes daily counts. A drop below 20 vessels per day signals Iran is actively interdicting; a normal flow is roughly 28-32.

Source: The Wall Street Journal

The News: Bitcoin declined an additional 3.1% Wednesday to roughly $65,890, extending Tuesday's 5.9% drop and bringing the cumulative two-day loss to nearly 9%. The total crypto market cap has shed about $260 billion in 48 hours. Ether fell 4%, Solana 5%, and the broader crypto basket between 3% and 7%. Spot Bitcoin ETF outflows accelerated to roughly $700 million on Tuesday and Wednesday combined, with IBIT seeing its largest single-day outflow since launch.

Why It Matters: For investors, the speed and breadth of the decline — across coins and against rallying gold — confirms this is a forced de-risking, not a fundamentals-driven move. Leveraged perpetual futures positions have unwound aggressively; open interest fell 18% in 48 hours. For consumers, crypto declines of this magnitude historically lead to retail engagement falling 30-40% over the next month, which will pressure exchange volumes at Coinbase and Robinhood.

What to Watch: The $65,000 level — Bitcoin has held that line six times in 2026. A close below opens the door to a quick retest of $58,000.

Source: Investopedia

The News: Swiss alternative-asset manager Partners Group capped redemptions from one of its flagship private-markets funds Wednesday, citing a need to preserve liquidity for unlisted investments. The gating triggered an immediate selloff across global alt-asset managers: Midday trading had KKR fell roughly 5.7% to its lowest level in three months, Blackstone declined 5.5%, Ares Management dropped 5%. Smaller credit managers — Owl Rock, Blue Owl, Hercules Capital — also declined 3% to 4%.

Why It Matters: For investors, the timing matters: alt-asset managers had been the standout outperformers of the 2026 first quarter, partly on the narrative that they would absorb private-credit allocations from pensions. Today's news challenges the assumption that private vehicles can stay liquid in stress. For consumers, the broader concern is that pension funds — public school teachers, firefighters, state employees — have moved 15-20% of allocations into private credit. Gating events accelerate the calls for greater transparency in those vehicles.

What to Watch: Whether other European or U.S. private-credit managers announce gating in the next 72 hours. Two more announcements would mark a meaningful change in the private-credit cycle.

Source: TheStreet

Q: How does a taco say grace?

A: Lettuce pray.

A U.S. Treasury inflation-protected savings bond whose interest rate has two components — a fixed rate set at purchase and a variable rate that resets every six months based on CPI inflation. Designed to preserve purchasing power, I Bonds can be held for up to 30 years, are exempt from state and local tax, and become penalty-free after five years.

Usage: "With WTI past $95 and the breakeven inflation rate climbing, several clients asked about reallocating cash into I Bonds to lock in the new October rate-reset before the variable rate readjusts."

Grit Capital: Get weekly deep dives on markets, stocks, and investing strategies used by 270K+ investors, hedge funds, billionaires, and advisors. Sign-up here.