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This Week on Wall Street
Week of June 1, 2026
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Market Commentary
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May turned out to be a month the market will remember. After spending March in a deep selloff over the war with Iran, stocks climbed all the way back to record highs, and the S&P 500 closed out its ninth straight weekly gain, its longest winning streak since 2023. The engine was the artificial intelligence trade. What started as a story about a few chipmakers broadened into software and the hardware behind AI data centers, and a steady run of strong earnings kept lifting expectations. Falling oil and rising hopes for a Middle East ceasefire added to the momentum. Brent crude had settled near $92.05 on Friday, well off its wartime highs near $100, as investors bet the Strait of Hormuz would soon reopen. That bet looks shakier today. Iran stepped back from talks with the United States and threatened to fully close the strait, and crude prices have moved higher in response. The move is a reminder that the cheaper energy underpinning May's rally is not yet a settled story.
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The week's biggest scheduled event is Friday's May jobs report. Consensus looks for hiring to slow to around 90,000, a step down from April, with the unemployment rate holding near 4.3%. A softer job market would normally strengthen the case for the Federal Reserve to cut interest rates. The complication is inflation, which is running at its hottest in nearly three years, and a fresh jump in oil prices would only add to it. That leaves the Fed caught between a cooling labor market and stubborn prices, which is what makes this report matter more than usual. Policymakers next meet in mid-June, and markets still expect them to hold rates steady. The earlier labor readings, from the ISM surveys and the ADP estimate, will set the tone before Friday.
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One thing worth watching beneath the record highs is how narrow the leadership has become. The S&P 500 is weighted by company size, so its biggest names drive most of the move, and their influence is now near record levels. AI-linked stocks make up close to half of the index's value, and the ten largest companies account for more than a third of it. The effect is easy to miss. Strip out the AI winners and the market has been roughly flat since February, even as the headline index keeps setting records. That tells us the rally is real but concentrated, and its health rests on a handful of names. Whether the gains broaden out from here, or the index stays this dependent on its leaders, is the dynamic worth watching.
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Chart of the Week
Software Just Logged Its Best Month Since 2001
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This chart plots monthly total returns for the IGV, the iShares Expanded Tech-Software Sector ETF, going back to 2001. May 2026 stands out, with the fund returning about 21.2%, its strongest month since October 2001 and the second best of 298 monthly readings on record. It captures how powerful the May surge in software was, as enthusiasm around enterprise AI spending lifted the group. The scale of the move is a reminder of both the momentum behind the trade and how far sentiment has traveled in a short time.
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| Source: Bloomberg |
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On the Calendar
Economic Releases This Week
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Monday ISM Manufacturing PMI
Tuesday JOLTS Job Openings
Wednesday ADP Employment, ISM Services PMI
Thursday Initial Jobless Claims
Friday Jobs Report (Nonfarm Payrolls, Unemployment Rate)
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Worth Reading
Stories to Start the Week
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| What is Newton? |
▼ 0–8
▬ 9–13
▲ 14–20
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Our Newton model determines the highest probability of future price direction using advanced algorithmic and high-order mathematical techniques on the current market environment. It scores securities over multiple time periods on a 0–20 scale (0 worst, 20 best). Trend and level both matter. A name moving from 18 to 16 still signals a strong level, with slight exhaustion in the trend.
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| Equities |
TREND |
THIS WK |
LAST WK |
| Mid Cap | ▲ | 18 | 18 |
| Small Cap | ▲ | 18 | 18 |
| Emerging Markets | ▲ | 18 | 14 |
| Large Cap | ▬ | 12 | 12 |
| Foreign Developed | ▬ | 11 | 9 |
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| Fixed Income |
TREND |
THIS WK |
LAST WK |
| High Yield Bond | ▬ | 10 | 11 |
| Long-Term Bond | ▬ | 10 | 8 |
| Floating Rate Bond | ▬ | 9 | 11 |
| Intermediate Term Bond | ▬ | 9 | 9 |
| Corporate Bond | ▼ | 8 | 8 |
| Short Term Bond | ▼ | 7 | 7 |
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| Sectors |
TREND |
THIS WK |
LAST WK |
| Consumer Cyclical | ▲ | 15 | 12 |
| Industrials | ▲ | 14 | 13 |
| Technology | ▲ | 14 | 12 |
| Real Estate | ▬ | 13 | 13 |
| Communications | ▬ | 13 | 12 |
| Utilities | ▬ | 12 | 11 |
| Materials | ▬ | 12 | 9 |
| Health Care | ▬ | 10 | 14 |
| Energy | ▬ | 9 | 14 |
| Financials | ▼ | 8 | 11 |
| Consumer Defensive | ▼ | 7 | 13 |
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| Market Segments |
TREND |
THIS WK |
LAST WK |
| Small Growth | ▲ | 18 | 18 |
| Mid-Cap Value | ▲ | 17 | 17 |
| Mid-Cap Growth | ▲ | 17 | 16 |
| Small Value | ▲ | 16 | 15 |
| Large Growth | ▲ | 14 | 14 |
| Large Value | ▬ | 12 | 16 |
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Notable Newton Moves This Week: The clearest shift was a fade in the defensive and energy trade that had been working while oil stayed elevated. Consumer Defensive dropped from 13 to 7, Energy slid from 14 to 9, and Health Care eased from 14 to 10. On the other side, the cyclical and growth groups firmed, with Consumer Cyclical rising into the top sector spot (12→15) and Technology pushing back into green (12→14). Emerging Markets jumped to 18 from 14. Among styles, value held broadly firm even as Large Value slipped from 16 to 12, leaving Mid- and Small-cap value as the steadier reads.
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Technical trading models are mathematically driven based upon historical data and trends of domestic and foreign market trading activity, including various industry and sector trading statistics within such markets. Technical trading models, through mathematical algorithms, attempt to identify when markets are likely to increase or decrease and identify appropriate entry and exit points. The primary risk of technical trading models is that historical trends and past performance cannot predict future trends and there is no assurance that the mathematical algorithms employed are designed properly, updated with new data, and can accurately predict future market, industry and sector performance.
Disclosure: Investing involves risk, including the possible loss of principal and fluctuation of value. Past performance is no guarantee of future results. This newsletter is not intended to be relied upon as forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. The opinions expressed are as of the date noted and may change as subsequent conditions vary. The information and opinions contained in this letter are derived from proprietary and nonproprietary sources deemed by Waterloo Capital to be reliable. The letter may contain "forward-looking" information that is not purely historical in nature. Such information may include, among other things, projections and forecasts. There is no guarantee that any forecast made will materialize. Reliance upon information in this letter is at sole discretion of the reader. Please consult with a Waterloo Capital financial advisor to ensure that any contemplated transaction in any securities or investment strategy mentioned in this newsletter aligns with your overall investment goals, objectives and tolerance for risk. Additional information about Waterloo Capital is available in its current disclosure documents, Form ADV, Form ADV Part 2A Brochure, and Client Relationship Summary report which are accessible online via the SEC's Investment Adviser Public Disclosure (IAPD) database at www.adviserinfo.sec.gov, using SEC # 133705. Waterloo Capital is neither an attorney nor an accountant, and no portion of this content should be interpreted as legal, accounting or tax advice.
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