Stock Market Shakeup: Oil Surge, Inflation & Geopolitical Tensions | Kenny Polcari

Well, good morning. Yes, it's me, Kenny Polcari, your host of the party. And today is Tuesday, May 5th, 2026. And here are the things that you need to know about to get your day started. Well, the Dow and transports really felt the pain yesterday. The VIX surges by 8%. Yields are up, bonds are down, oil's up, gold is down. And Palantir, they crushed it last night after the bell as the earning parade continues. And what do we have for dinner tonight? We're gonna have the creamy chicken breast. We're gonna get to those in a minute. So stocks came under pressure yesterday. The Dow, the Dow Jones, which suffered most of the damage. We're gonna get to that in a moment because that's a big part of the story. But let me remind you, for the past couple of weeks, investors, traders, and even the algos have been, um, they've been walking around like it's all wine and roses. Right? Like stocks are hitting new highs and it's a strong earnings season and the VIX has been in decline, suggesting what? Complacency. And I've been beating that theme to death. And it sounds like everything is just fine until it isn't. Now, yesterday was a reminder the market is not operating in a vacuum. And when the geopolitical narrative heats up, it really hits you right over the head. No need to overcomplicate it because it's not that complicated. Listen, the Strait is still shut down. Trump threatens to blow the place apart if Iran gets in the way of ships navigating the Strait. Well, guess what? Iran got in the way. Oil surged. WTI surging to a high of $107.46 before it closed at $106.30. Brent hits $115. Rates rose. The 2-year ended the day yielding 3.95%. The 10-year's at 4.43%. The 30-year ended the day at 5.01%, and that pushed mortgage rates to closer to 6.5%. The VIX, that surged as much as 12.5% midday before settling up 7.6% to end the day at 1828. Still in what's considered calm territory, yet maybe not so much. And stocks got sold. Also recall what I told you yesterday in the last paragraph in the note that the S&P, NASDAQ, and Mag 7 were all in technically overbought territory. So a pullback shouldn't be a surprise to anybody. Now, technically overbought means that the relative strength index is kissing or penetrating the 70 line on the chart. Now, that's not noise, that's the market repricing risk in real time. Because once oil made that move, it forced the conversation right back to inflation. And once inflation reenters the chat, rates respond immediately. And when rates rise, equities have no choice but to adjust. And in this case, they're adjusting lower. And yesterday, that chain lit up like a Christmas tree. At the end of the day, the majority of the tree was in red with just one little strand of green. The Dow lost 557 points, or 1.1%. The S&P lost 30 points, or just 0.4%. The NASDAQ gave up 46 points, or just 0.2%. The Russell lost 17 points, or 0.6%. The transports, like the Dow, got crushed, losing 992 points or 4.8%. The Equal Weight SV lost 50 points or 6/10, while the Mag 7 added, added 12 points. Now let's talk about the elephant in the room, because there's a big one in the room. The situation in the Strait of Hormuz is not calming down. It, it's actually becoming more complicated. Now we continue to talk about disruptions of shipping lanes and attacks on Middle East allies tied to Iranian forces and their proxies. Energy infrastructure is at risk. We haven't even talked about the tanker insurance costs that are surging, never mind the rerouting of the global supply chains. And remember, the media has been making it all about this 20% of the world's oil having to go through the Strait. Okay, that's true, but guess what? It is so much bigger than just that. They're actually underselling it, right? Because besides oil, There's LNG, which is liquid natural gas. There's fertilizers, petrochemicals, there's plastics, and there's general cargo that all flows through the strait that Iran has essentially closed. So this isn't just an energy story, it's a global supply chain story. And the longer it stays disrupted, the more pressure works its way into prices for everything from gasoline to grocery bags. So you better buckle up. Now, Yes, Trump, Bessant, and Hegseth, you know, they all tell us, yeah, quote, talks are progressing, negotiations are ongoing, a deal is close, they have no Navy, they have no intel, blah blah blah blah blah. Okay, but let's be honest, if that's the case, then why hasn't it been resolved yet? Because that's the issue, and that was the issue yesterday for markets and for investors. Because this market continues to trade as if every problem was solved, right, last week. But in reality, it has not been solved. I mean, who's kidding who? Okay, but let's move on because we've also beaten that to death. So why did the Dow get hit so much harder than the S&P and the Nasdaq yesterday? Simple. It comes down to the composition and the weighting. That's it. The Dow is a price-weighted, uh, index, just 30 stocks. And when high-priced names get crushed the index feels it disproportionately. It's just the math, right? The names that got punished the most— the most— consumer discretionary down 8/10, basic materials down 1.4%, industrials down 1.1%. Home Depot is off 3.5%. It's a high-priced stock. Nike down nearly 3%. Boeing down 2.6%, another high-priced stock. Linde fell 2.8%. Freeport-McMoRan lost 1.7%. Meanwhile, the NASDAQ barely flinched because tech does not care about oil the way retailers and manufacturers have to. And it wasn't just the industrials taking the hit. The transports got crushed too, and that matters more than some people realize. The transports were already down 17% from the April 22nd peak, and then Monday it happened. Think about it. Fuel— oil— is the single largest variable cost for every trucker, every railroad, every airline in the country, and by the way, the world, right? When oil spikes 4 to 5% in a single session, the cost structure blows up. And unless they— the rails, the truckers, and the airlines— can pass those costs through fast, which is nearly impossible in a softening freight environment, it goes straight to the, to their bottom line. Old Dominion dropped 6.8%. Avis Budget fell 8%. FDX fell 9.1%. UPS fell 10.5%. J.B. Hunt lost 4.2%. And it wasn't just the fuel cost shock. It was the routing problem on top of it. Ships now have to reroute around the Strait of Hormuz, and that means longer voyages, more fuel burned, more delays, and a logistics chain that is getting more expensive and more complicated by the day. But here's what you need to understand. The transports matter beyond just the sector itself. It goes back to the Dow theory, and we've discussed this in prior notes. Charles Dow made it very clear: you cannot confirm a bull market in the industrials without the transports confirming it. When these— when the industrials drop 550 points and the transports continue to get slammed, that's not just a bad day, that's the market sending you a warning, a warning about the economy. Now we need to manufacture goods, and those goods have to move. So when moving them becomes dramatically more expensive and more complicated, everything down the food chain feels it. Now, gold, that continues to come under pressure because investors are focused on what? Inflation and rates, period, the end. It's no longer about the safe haven. And yesterday it fell by $93 or 2% to end the day at $4,520. Now it remains in that $4,290, $4,770 trading range, but in this morning it's bouncing a little bit. It's up $23. 45, 43. But it's really focusing on inflation and rates. After the bell, we heard from Palantir. They blew the roof and the windows off the house. Revenues grew by 85%, coming in at $1.63 billion versus the expected $1.54 billion. Earnings per share, $0.33 versus the $0.28 expected. Net income quadrupled year over year, and they raised their full-year guidance to $7.65 billion. The stock closed up 1.4% during the trading day but got clocked after the bell this morning. It's down 2.6% in the pre-market. Norwegian Cruise Lines, they beat but cut their guidance. Think geopolitics and rising fuel costs. That stock got smashed down 8.6%, and it dragged Royal Caribbean and Carnival down as well, 2.3% and 3.7% respectively. Today we're going to await Archer Daniels, Duke, and Pfizer all before the bell. Pfizer announced they crushed it. While we expect AMD, PayPal, and KKR after the bell. There'll be others, but those are the key names. ECO data today includes the S&P and ISM Services PMI, both expected to be in the expansion zone, and that's an important data point. New home sales, building permits, and the JOLTS report. European markets are mostly higher. Italy's up 2.2% in the lead, while the UK is down 1%. The UK is, uh, um, down 1%. Uh, US futures are higher. They're The Dow's up 121, S&P's are up 30, the NASDAQ's up 150, and the Russell's up 10. The S&P closed at 7,200, down 30 points. I suspect we're going to continue to churn in here as investors are once again forced to focus on the geopolitical issues. But remember, in the long term, those issues do not price stocks, they create chaos, and that chaos creates long-term opportunity for the long-term investor. Now I'm happy to discuss that. Staying invested in a diversified, well-balanced portfolio is key, especially now. And taking advantage of price dislocations due to geopolitical chaos is also key. You can call me at 561-931-0190, and let's talk about how Slatestone Wealth can help you navigate all of this to help you reach your end goal. Okay, dinner time tonight. This is simple, it's easy, delicious. It's going to become a family favorite. You can thank me later. It's pan-seared chicken breast in kind of this silky creamy sauce, right? So if you're tired of the same old chicken cutlets, try this because like I said, it's easy, quick, and delicious. First you need thin sliced breasts, olive oil, light cream— you can use heavy cream if you want— flour, salt, pepper, paprika, onions, butter, and parsley. Begin by marinating the breast in a pan with olive oil, salt, and pepper, and the paprika. Massage the seasoning so that the cutlets are very nicely seasoned. Now slice your yellow onion, make it thin, add it to a large sauté pan with a dollop of butter. Sauté the onions for 10 minutes or so. Careful, don't burn them, so turn the heat to medium-high but stay there. Make sure you turn— you want them to get soft and translucent. Now remove the onions, set them aside. Add another dollop of butter to the pan, let it all melt, get nice and hot. Now add the seasoned breast to the pan, brown on each side. It's maybe 4 minutes per side. You know, you want them to get a little bit of color on them, right? When that's done, add back the onions. Here now, you could add in a half a cup of white wine if you want. It's not necessary, but it gives it a different flair. If you do, then allow the wine to evaporate, and then you can continue. If you do that, after it evaporates, now add in 2 tablespoons of flour, spreading it all over the breast, and add in 1 cup of light cream. Turn the heat to medium and allow it to all come together and become creamy. When it's done, dress it with some chopped parsley on top just to give a little bit of color, and enjoy. You're gonna, you're gonna— this is an easy meal, you're gonna love it, the kids are gonna love it, and you're gonna thank me later. It is actually a beautiful day out here in Florida today. The sun is clear, the sun is out, the sky is blue. Remember yesterday I said it was dark and gloomy, and I wonder if that said anything about the market? And look at what happened today. It's all clear skies and blue. So let's see if the market turns around. Until tomorrow, take good care.