Market Commentary - Week of April 26, 2026

StoicFunds Signal Check

• Macro Regime: In transition. The S&P continues to climb above 7,000, posting new all-time highs. But oil is ticking higher again with Hormuz still functionally closed. The regime hasn't officially flipped — DBO and GLD momentum still elevated relative to SPY and TLT on the last published reading. A sustained decline in oil or a confirmed ceasefire would trigger the flip. Until then, the system reads a regime in limbo.
• Market Stress: Improving but not confirmed. The rally is now several weeks old, semiconductor stocks are going parabolic, and breadth is expanding. But the Strait of Hormuz remains closed, oil is above pre-war levels, and Kushner and Witkoff are heading to the Middle East with a third carrier moving into position.
• Momentum: Risk-on broadening. Semiconductors leading (Intel +25% in a single day, AMD +12%). Bank earnings from last week still supporting financials. Energy giving back gains but not collapsing. Software getting crushed again (ServiceNow -17%, IBM -7%). The rotation is uneven.
• The system waits for confirmation. Headlines say rally. Oil says caution. The models don't trade narratives.

Iran — Still Opaque, Market Doesn't Care

• The war conclusion remains elusive. VP Vance's planned trip to Pakistan for negotiations was put on hold as Iranian factions issue contradictory statements. Trump announced he would give Iran time to assemble a proposal
• Third aircraft carrier now moving into position. Kushner and Witkoff are heading to the Middle East. The pattern from February, March, and April has been consistent: negotiate, then attack. Three carriers in theater is not a peace posture
• Markets keep rallying anyway — pricing in a resolution that hasn't happened yet. Oil is ticking higher, jet fuel continues to climb, and the Strait remains functionally closed
• The gap between market pricing and geopolitical reality is widening. Either the market is right and a resolution is imminent, or this is a gap that closes violently

Earnings Season — 100+ Companies, No Recession

• Over 100 companies reported across multiple industries this week. The data provides a broad-based window into the economy, and the conclusion is clear: results were mostly good. There is no data indicating a recession is looming
• The war is hitting some companies directly. United Airlines cut 2026 EPS guidance from $12-14 to $7-11 due to higher oil. American Airlines also cut guidance. Airlines are the first casualties of elevated energy costs
• But industrials are surging:
  • GE Aerospace: EPS +25%, revenue +29%, total orders up 87%. Airlines are not pulling back from buying new airplanes
  • GE Vernova: EPS +85%, orders +71%, raised guidance. Only three companies in the world manufacture gas turbines (GEV, Siemens, Mitsubishi). US electrical production growing ~3% annually off a massive base — AI data centers are the primary driver
  • Boeing: Loss narrowed, delivered 143 aircraft — most since 2019
• Tesla: EPS beat (41c vs 34c expected), revenue missed. Capex raised above $25B for autonomous vehicles and robots. 200x PE — bulls and bears are trading entirely different companies

Blackstone BCRED — The Private Credit Bellwether

• Blackstone's $81B flagship private credit fund reported a troubling quarter. New share issuances fell to ~$230M in April, down from $1B/month average in 2025. Performance was flat in March after -40bps in February
• Non-accruals climbed to 1.4% of fair value. Portfolio value dragged by Medallia (marked at 60.3 cents) and Affordable Care (69.8 cents)
• Distributable earnings rose 25% to $1.76B, and AUM hit $1.3T (+12% YoY). But returns fell across credit and real estate: opportunistic RE +90bps, liquid credit -1.3%, private credit +60bps
• The tension is clear: Blackstone keeps raising assets (drew in $69B new capital), but the performance engine is sputtering. Inflows subsidize the business model while returns compress

FICO — A Decades-Long Monopoly Broken in a Week

• The FHFA announced that Fannie Mae and Freddie Mac will accept VantageScore 4.0 alongside FICO for mortgage lending — ending FICO's exclusive grip on the consumer credit scoring market
• Loan-level pricing adjustments will present a level playing field between FICO and VantageScore. Previously, FICO bulls argued pricing grids would favor the classic score. That argument is dead
• VantageScore 4.0 incorporates trended credit data and alternative payment histories (rent, utilities) — potentially expanding mortgage access to underserved borrowers
• FICO stock is down over 40% YTD. This is a case study in how regulatory action combined with competitive alternatives can dismantle an entrenched market position almost overnight

Health Insurance — Signs of a Turn

• UNH: EPS $7.23 vs $6.57 expected — a solid beat driven by medical loss ratio improvement. The bull case for UNH has been that its traditional insurance business can reprice quickly (short-tailed), and this quarter delivered evidence of that thesis
• Elevance: 5% EPS beat, but driven by non-recurring investment income. Added to claims reserves (helps 2027). Consensus still expects 15% EPS decline for full-year 2026
• Molina: EPS $2.35 vs $1.90 expected — 80bps MLR beat. But Medicaid membership still declining (4.498M vs 4.568M in Q4). Remaining cohorts are sicker, which pressures future MLRs
• The group has bounced, but this is early-stage turnaround territory. Investors love a turnaround story — the question is whether the evidence sustains

Software — The Narrative Gets Worse

• ServiceNow: Revenue +22% to $3.77B, EPS beat. But subscription revenue took a ~75bps headwind from delayed Middle East deals. Stock fell 17% — its worst day on record. Analysts slashed price targets (Goldman: $188→$163, Jefferies: $175→$135). The stock is down 45% YTD
• IBM: EPS and revenue beat, software revenue +11% to $7.05B. But inline software revenue in this environment is not enough. Stock fell 7%
• The reactions to ServiceNow and IBM illustrate how precarious the software narrative has become. In any other market, 22% revenue growth would be celebrated. In this one, any hint of friction gets punished. Bottom-fishing in this sector remains dangerous
• A practitioner view on the AI-software debate is emerging: Internalization of software is overstated. The real constraints are total cost of ownership (building is easy, maintaining is not), talent gaps, compliance requirements, and the fact that sales and marketing — not R&D — is the largest cost for most software companies. AI coding doesn't reduce go-to-market costs

SpaceX-Cursor — The $60B Vertical Integration Play

• SpaceX struck a deal to acquire Cursor for $60B (or pay $10B collaboration/breakup fee). Cursor halted a $2B fundraise to take the deal. The acquisition is structured to close after SpaceX's IPO this summer to avoid rewriting the S-1
• Cursor's run rate: $2B at end of February, targeting $6B by year-end. Tripling revenue in a year. This is the most valuable third-party AI coding tool in the market
• The strategic logic: Elon has 550,000 GPUs in Colossus, scaling to 1M. Cursor has the best coding model and the user base. Compute + product = vertical integration. Microsoft reportedly looked at buying Cursor first
• SpaceX IPO now targeting $2T valuation. At 80x revenue. The Cursor acquisition at $60B would be ~30x revenue — accretive to the story. SpaceX projected revenue: $22-24B in 2026

The Fed Playbook Changes — Warsh Confirmation

• Kevin Warsh's confirmation hearing revealed the strategy. He will be confirmed and could sit as Fed chair for the June meeting
• The rate-cut playbook: Warsh is pushing "trimmed mean PCE" as the preferred inflation metric — which strips out tail moves and reads lower than headline CPI or core PCE. He's also floated alternative data collection methods (Billion Prices Project). If the official indexes don't cooperate, redefine the indexes
• Fed independence is being narrowed. Warsh asserted independence over interest rate policy specifically, but opened the door on international finance (swap lines) and banking regulation. The practical effect: the White House gains influence over monetary diplomacy
• UAE requesting a Fed dollar swap line. Treasury Secretary Bessent appears supportive. This could become a new diplomatic tool — or a fiscal policy backdoor through opaque Gulf counterparties. Swap lines are effectively unlimited dollar access
• The real constraint isn't the committee — it's the public. If Hormuz stays closed and oil keeps climbing, no amount of index redefinition will make inflation invisible to consumers. That's the ceiling on rate cuts, even for a Warsh Fed

Semiconductor Frenzy — Blowoff Top or Structural Shift?

• Intel surged 25% in a single day — its best day since 1987. Data center revenue +22% to $5.1B. The stock finally exceeded its dot-com era highs, up 74% YTD
• AMD +12%, Arm, Marvell, SMCI, ASML, TSMC all surging. New AI models from multiple labs (ChatGPT, Claude, DeepSeek) are driving insatiable compute demand
• The market has concluded we don't have enough compute. Every company is bidding for GPUs. Hyperscalers are financing purchases out of profitable businesses and by cutting headcount — Meta and Microsoft are both reducing staff to redirect capital toward AI infrastructure
• The AI model layer is commoditizing. DeepSeek's latest is open source. The models are converging in capability. Chip makers are the clear winners in the value chain. But whether current prices reflect rational expectations or frenzy is the question
• The subsidy question remains: Hyperscalers are pricing compute below cost to drive adoption. When they charge at cost, usage will decline. The demand curve for GPUs at subsidized prices is not the demand curve at market prices

Market Performance

• S&P 500 continues at all-time highs above 7,000
• Intel: +25% single day, best since 1987. Up 74% YTD
• ServiceNow: -17%, worst day on record. Down 45% YTD
• FICO: Down 40%+ YTD after VantageScore announcement
• GE Vernova: EPS +85%, orders +71%. 80x 2026 PE but 36x on 2028 estimates
• Boeing: Most deliveries since 2019 (143 planes)
• United Airlines: Cut 2026 guidance from $12-14 to $7-11 (oil impact)
• Blackstone: Beat on distributable earnings but performance metrics weak across credit and RE
• Fed meeting this week: No move expected. Market watching whether Powell signals departure timeline