Nasdaq hits another record, but the Fed isn't easing up

Good morning. The Nasdaq closed at a record high for the second straight day, lifted by AI names such as Micron. The spark came a session earlier, when Meta launched an AI agent called Muse and had its best day since April. The Dow slipped, though, and the S&P 500 stayed just below its high.

Signs that the rally is narrow keep piling up. On a day the Nasdaq 100 jumped, only seven S&P 500 stocks hit 52-week highs while 30 hit lows. Financials fell on AI competition worries and a flattening yield curve. Optimists expect double-digit profit growth in coming earnings, but skeptics reply there is no evidence yet that AI has lifted margins outside tech.

The rate backdrop was rougher. Fed officials kept the door open to more hikes after last week's move. Richmond Fed's Barkin said one hike may not be enough, and Chicago's Goolsbee warned that fighting inflation could mean some pain in unemployment. A $69 billion two-year Treasury auction drew the highest yield demanded by investors since 2024.

Oil is catching its breath. Reports that Iran offered to open the Strait of Hormuz within a week, and that Saudi Arabia is restarting its pipeline, pushed crude down toward $100. But with US retail diesel topping $6.50 a gallon for the first time, President Trump said he backs banning diesel exports and will decide quickly.