THE MONEY FOUND ITS WAY HOME
Where We Are. Where We’re Going. What Could Break It.
An OUR TRADE DESK Market Letter — Johnny A.
I told you the money was flowing back into the Mag 7.
I’m going back to our note from April 12, 2026, when the rotation was just starting to develop
and I told you what I was seeing on my screen: institutional money was quietly starting to flow back into the Magnificent Seven. The group had been beaten, battered, and left for dead by a market obsessed with the energy and defense plays after the Iran war broke out. Mag 7 was down 10.5% in Q1. MAGS was down 11.6% YTD. Microsoft was the worst at -23.5%. Tesla at -17.4%.
Three weeks later, that rotation didn’t just play out — it became the trade of the year so far. Here is what April delivered:
| Index / Group | April 2026 Return |
Significance (Time-stamped May 1, 2026 close) |
| S&P 500 | +10.4% |
Largest monthly gain since November 2020 |
| Nasdaq Composite |
strongest month since April 2020 |
Record close at 25,114.44 |
| Dow Jones |
strongest month since November 2024 |
Closed 49,499.27 |
| Magnificent 7 (MAGS ETF) | approximately +20% |
March 31 close ~$55.39 → April 30 close ~$66.56 |
| S&P 500 closing level | 7,230.12 (May 1 close) |
First close ever above 7,200 |
The S&P 500 closed Friday at 7,230.12 — a fresh all-time high. (Source: Yahoo Finance /
FRED, time-stamped May 1, 2026, 5:07:23 PM EDT.)
Russell 2000 closed Friday at 2,812.82. VIX at 16.99. Crude at $101.94, down 2.98% on the
day on Iran-talks optimism.
That call wasn’t luck — it was reading the tape. The money came home.
EARNINGS SEASON: A BLOWOUT NO ONE IS TALKING ABOUT
Per the FactSet Earnings Insight report dated May 1, 2026 (John Butters, Sr. Earnings
Analyst):
- 63% of S&P 500 companies have reported actual Q1 2026 results (315 of 500).
- 84% beat EPS estimates — highest beat rate since Q2 2021 (87%).
- 81% beat revenue estimates — highest revenue beat rate since Q2 2021.
- Aggregate earnings are coming in 20.7% above estimates — highest surprise magnitude since Q1 2021.
- Blended Q1 2026 earnings growth rate: 27.1% — up from 15.0% one week earlier and 13.1% at the end of the quarter (March 31).
- This is the highest year-over-year earnings growth rate reported by the index since Q4 2021 (32.0%).
- Blended Q1 2026 revenue growth rate: 11.1% — highest since Q2 2022.
- This is the 6th consecutive quarter of double-digit earnings growth.
- Nine of eleven sectors are reporting earnings growth. Only Health Care and Energy are showing year-over-year declines.
This earnings season is dramatically better than the consensus going in. Estimates were
carrying 13.2% growth at March 31. We’re now tracking 27.1%. That is the earnings story
driving this rally — not just multiple expansion.
THE MAG 7 EARNINGS BREAKOUT
Six of the seven Magnificent Seven have already reported. Only Nvidia (NVDA) is still ahead — May 27, 2026 is the date. Here is the scorecard, time-stamped to actual reports:
| Company | Report Date |
Revenue Growth |
EPS Growth | Beat / Miss |
| Tesla (TSLA) |
April 22, 2026 AMC |
+16% to $22.4B |
+52% non-GAAP ($0.41 vs $0.37 est.) |
BEAT EPS (rev slight miss vs LSEG) |
|
Alphabet (GOOGL) |
April 29, 2026 AMC |
+22% to $109.9B |
+82% to $5.11 |
BEAT (Cloud +63% to $20B; backlog $460B) |
|
Microsoft (MSFT) |
April 29, 2026 AMC |
+18% to $82.9B |
+23% ($4.27 vs $4.06 est.) |
BEAT (AI run-rate now $37B, +123% YoY) |
| Meta (META) |
April 29, 2026 AMC |
+33% to $56.3B | +62% to $10.44 |
BEAT ($7.31 adj. vs $6.79 est.) |
|
Amazon (AMZN) |
April 29, 2026 AMC |
+17% to $181.5B |
Net income ~doubled |
BEAT (AWS +28% to $37.6B) |
| Apple (AAPL) |
April 30, 2026 AMC |
+17% to $111.2B |
+22% to $2.01 |
BEAT (record March quarter; $100B buyback) |
| Nvidia (NVDA) | May 27,2026
(still pending) |
TBD | TBD | TBD |
Six of six reporters BEAT on EPS. Five of six beat on revenue. That’s a clean sweep.
Individual April stock performance (March 31 close to April 30 close — source: 24/7 Wall St., May 1, 2026; The Motley Fool, April 30, 2026):
- Alphabet (GOOGL): +34% (April winner)
- Amazon (AMZN): +27%
- Microsoft (MSFT): +10%
- Meta (META): +7% (jumped to capex guide)
Guidance: Capex Up Across the Board, Forward EPS Mixed
This is the part that nuance matters. There are two different “guidance” stories happening:
Capex guidance — RAISED at every hyperscaler:
- Meta: 2026 capex range raised to $125–$145B (up $10B from prior $115–$135B)
- Alphabet: 2026 capex range raised to $180–$190B (up $5B at both ends)-
- Microsoft: 2026 capex now expected at $190B (~$25B incremental from component
- pricing)
- Amazon: Hyperscaler capex collectively projected at ~$725B for 2026 across the four
This is a screaming “all-in on AI infrastructure” message. JPMorgan downgraded Meta on the capex re-rating concerns. The market punished Meta (-9% on the report) and Microsoft (-4%) intraday, while rewarding Alphabet (+10%) — because Alphabet showed real-time ROI on the spend (Cloud +63%) while Meta and Microsoft are still asking investors to wait.
Forward Q2 2026 EPS guidance — slight negative tilt: Per FactSet (May 1, 2026): for Q2
2026 so far, 28 S&P 500 companies have issued negative EPS guidance versus 23
positive. That’s 55% negative / 45% positive — but the sample is still small (51 issuers). The
5-year average of negative-guidance percentage is 57%, so even at “negative” we’re tracking better than the historical average.
So: more companies guiding cautiously than aggressively, but the magnitude of the actual Q1 beats is overwhelming the cautious guides.
GAMMA STRUCTURE: WE BLEW THROUGH 7,200
You called it. We went right through the 7,200 SPX gamma wall on Friday. Confirmed.
Per InsiderFinance live GEX data fetched at 12:18 PM EDT on Sunday, May 3, 2026:
- SPX spot: $7,219.63
- Net GEX: +$54.80B (positive gamma — volatility-suppressing)
- Zero Gamma Level: $7,029.07 (the gamma flip — below this we go negative-gamma and volatility expands)
- PEAK GEX strike has shifted from $7,200 to $7,300 — 95.3K calls in open interest at that strike
- Put Wall: $6,800 (195.0K puts) — the structural floor
- Call/Put OI ratio: 1.24 — elevated put activity = ongoing hedging
- Total open interest: 10.7M contracts
Bottom line on gamma: The next major gamma wall is SPX 7,300 — approximately 1.0–1.1% above current levels. That’s our next test. Heavy concentration is around monthly OPEX Friday, May 15, 2026 and the much bigger quarterly OPEX Friday, June 19, 2026. Net positive $54.8B gamma means dealers are still long gamma, which is mechanically suppressing volatility and supporting dips. That changes the moment we lose 7,029.
We are in a friendly gamma environment as long as we stay above 7,029. Below that, the
regime flips and 6,800 becomes the magnet.
THE SMALL CAP SETUP — WHY THE NEXT 2–4 WEEKS MATTER
Here is where I think the next move is. The Mag 7 has had its torch passed. The S&P 493 has been carrying water for months. Now — over the next 2 to 4 weeks — small caps need to take the relay. Let’s hope!
The math is what it is. Per Apollo Global Management’s Torsten Slok (October 2025) and
confirmed in current market data: approximately 40% of the companies in the Russell 2000 had no earnings or negative earnings in 2025. That’s nearly half the index losing money.
Meanwhile, the S&P SmallCap 600 is forecast to deliver 18.6% EPS growth in 2026 versus a deeply negative 2024 print, per CFRA. The forecast for 2026 is that many of those
money-losing small caps swing to profitability — that is the bull case, and it is real.
Here is the catch: rising short-term rates are the single biggest threat to that thesis.
- Russell 2000 has roughly 32% of its debt at floating rates versus only 6% for the S&P 500 (Brown Advisory, FinancialContent reporting).
- A $1.35 trillion corporate maturity wall is currently being refinanced — at rates 150 to 200 basis points higher than the 2021-era debt being rolled.
- Many small caps in early 2026 already failed to refinance cleanly at acceptable rates.
Translation: if short rates keep climbing from here, the small-cap profitability swing gets capped before it can play out.
Current short-rate picture (FRED & U.S. Treasury, time-stamped May 1, 2026, 4:56 PM
CDT):
- 2-Year Treasury yield: 3.88% (up 0.02 on the day; up 0.08 over the past month)
- 10-Year Treasury yield: 4.39%
- 30-Year Treasury yield: 4.97%
The 2-year is the one to watch. It’s inching higher, not lower. That is exactly the dynamic that punishes the unprofitable small caps trying to refinance. The Fed left rates unchanged on April 29 in its most divided vote since 1992. The ECB and Bank of England both held — but markets are now pricing 75% probability of an ECB hike in June and >50% for the Bank of England.
Global short-rate pressure is higher, not lower.
You are right. If the next 2–4 weeks of small-cap earnings come in showing real margin
recovery and a path to profit, AND short rates don’t spike, the Russell can take the baton. If
short rates kick higher — even 25 bps — the thesis is in trouble before it starts.THE BOND VOLATILITY WATCH
Just as important: bond market volatility. The MOVE Index closed near 70.4 on May 2, 2026, with V-Lab modeling 71.78 for Monday’s open — historically calm. (Anything under 80 is “risk on” for equities; 80–120 is mixed; above 120 is stress.)
A spike in MOVE above 100 in the next month would be the canary. That’s where small-cap credit spreads start blowing out and where the floating-rate refinance story becomes a
credit-quality story. Treasury volatility leads small-cap volatility — every time. Watch this number daily.
IRAN — THE WILD CARD STILL ON THE TABLE
Strong undertone. Underlying breadth. Earnings beating across the board. But — and this is the critical “but” — this market is still vulnerable to a single bad headline out of the Middle East.
As of this morning (Sunday, May 3, 2026):
- The U.S. –Iran ceasefire from April 7–8 has been extended indefinitely but is described by the State Department as a “fragile truce.“
- A dual blockade is in place: U.S. Navy is blockading Iranian ports (48 vessels turned back in 20 days per CENTCOM); Iran is still blockading the Strait of Hormuz to non-Iranian shipping.
- Trump told congressional leaders on May 1 that hostilities had “terminated” since April — but on May 3, Trump publicly stated the U.S. may consider resuming strikes on Iran (per Wikipedia and CBS News live updates fetched today).
- Iran submitted a fresh peace proposal through Pakistani mediators on Thursday April 30/ Friday May 1. Trump said Saturday he is reviewing it but cannot imagine it would be acceptable.
- In Lebanon, Israel and Hezbollah have continued to trade strikes despite a separate ceasefire. As of today, 73 people killed and 163 injured in Lebanon since April 30.
The market is leaning bullish into this — oil dropped 2.98% Friday on optimism. But oil is still at $101.94, well above pre-conflict levels. One bad Hormuz incident, one Israeli strike on the wrong target, one Trump truth-social post that sounds like a re-escalation, and the
volatility spike is right there waiting. The market is not priced for that. We are priced for
resolution.
THE BOTTOM LINE TL:DR
The undertone here is genuinely strong. We had:
- The biggest monthly S&P move since November 2020.
- The strongest blended earnings growth since Q4 2021.
- A 6-of-6 Mag 7 EPS beat sweep with massive capex commitments behind AI.
- Net positive dealer gamma of $54.8B providing structural support.
- Hyperscaler cap-ex commitments of nearly $725 billion combined for 2026 — that money has to go somewhere, and a lot of it lands in the supply chain, semiconductors, power infrastructure, and small-cap industrial servicers.
But this is a market with a nervous undertone underneath that strength. The MOVE Index is calm but coiled. Short rates are creeping higher. Iran is one truth-social post away from
re-igniting volatility. The next gamma wall at 7,300 is right there. And the small-cap profitability thesis depends on short rates not breaking out higher.
Over the next 2 to 4 weeks, small caps need to take the ball and run. Many Russell 2000
names report this month. If they print real profit improvement — and short rates stay anchored — the rotation extends and we test 7,300, then beyond. If short rates spike and the credit picture sours, we’ll know fast, and the response should be defensive.
Watch the 2-year. Watch the MOVE Index. Watch the Hormuz wire.
The trade we called in April delivered. The next leg is up to the small caps and the Treasury
market. We’ll know within the month.
Don’t dream what you want to do. Do what you dream. Living is about
memories, not dreams. There is always room for another good
memory.
Our Trade Desk ourtradedesk.com