No good deed goes unpunished: The Magnificent 7 were down 1.25% at the close. Broadcom fared even worse. It lost 12.8% in overnight trading after reporting revenues that were a smidge below expectations, and after CEO Hock Tan didn’t raise his guidance for future AI chip sales. To put that in context: Investors punished the company despite the fact that revenue was up 48% to $15 billion from the prior year, and its stock is up 38.47% for the year.

Why does the S&P 500 keep hitting new highs? Because of strong fundamentals. Revenues across the index rose 6.3% annually and earnings grew 26% in Q1, according to Ronnie Walker at Goldman Sachs.

“FEMO”: Ed Yardeni and Toby Hearst of Yardeni Research have a word for this: FEMO, which stands for “fabulous earnings momentum.” They’re still bullish: “On May 10, we raised our year-end target for the S&P 500 from 7,700 to 8,250. We are sticking with it.”

Increased “uncertainty”: Paul Donovan at UBS hit Command+F on the latest from the Fed. “The Federal Reserve Beige Book’s summary of economic anecdote mentioned ‘uncertain’ and ‘uncertainty’ no fewer than 50 times this month (before tariffs were announced). That is below the uncertainty peak that followed last year’s tariffs, but well above the 14 mentions in May 2024. Uncertainty has a paralyzing effect on business decisions—and the risk is that uncertainty endures.”

ONE BIG THING

SpaceX IPO docs suggest merger with Tesla and a $4 billion windfall for insiders

There is a new sentence in SpaceX’s amended IPO filing which gives a strong clue to Elon Musk’s plan for the company. The line says that the company “may issue a significant amount of equity in connection with future transactions.” Aside from the obvious shareholder dilution that might entail, it seems to be suggesting that SpaceX will purchase Musk’s second-largest holding, Tesla, according to Fortune’s Shawn Tully.

At the same time, the IPO also reserves 5% of its shares for “certain employees and persons…and friends and families of our executive officers” who “will not be subject to a lockup restriction.” In other words, the folks who receive these allocations, unlike Elon Musk and top execs who can’t sell for around a year, are free to unload their holdings any time after SpaceX’s debut, slated for mid-June.

These recipients could pocket gigantic windfalls overnight. SpaceX will issue 555.6 million shares at $135 each to raise roughly $75 billion. So it’s handing friends and family the right to buy $3.75 billion in shares (5% of $75 billion) at the “insider” price.

• SpaceX reveals its share price and record valuation: 555.6 million shares at $135 apiece, at a $1.77 trillion valuation - Eva Roytburg
• SpaceX may be the biggest IPO ever, but Morningstar says it is overvalued by half and the smart investors will wait out the hype and buy later - Marco Quiroz-Gutierrez
• Jamie Dimon to Pitch JPMorgan’s Ultra-Rich Clients on SpaceX IPO - Bloomberg

WHAT GOES UP MUST COME DOWN

Ray Dalio: Yes, AI is a bubble and here is how it will burst

“All great technology changes produce bubbles,” Ray Dalio, founder of Bridgewater Associates, told Bloomberg. “Nobody can get it exactly right. You have to either spend a ton of money to capture your market share and don’t worry about whether it’s too much or not, or you don’t spend enough money and you lose your market share.”

“The pricking is the converting of wealth into money,” he said. Today’s AI-driven market is “following that kind of path, even though it is a wonderful technology.”

• Meta Keeps Delaying the Release of Its New AI Model to Developers - WSJ

“STRONG, IT MAY BE”

If the jobs number comes in hot, the Fed will be under pressure to raise interest rates

The new jobs number—nonfarm payrolls, to give it its official name—will be published Friday and, as always, it will be closely watched for clues as to how it might influence the Fed. Many analysts are predicting the number will be between 85,000 and 92,000.

“Strong, it may be,” to quote Bank of America’s Alex Cohen (who was channeling Yoda in a note yesterday for no obvious reason). He’s hoping it’s going to be 95,000.

If the job market remains healthy, that increases the pressure on the Fed to hike interest rates because it would mean that inflation is likely still being pushed higher by healthy wage demands and the rising price of oil. Raising rates is the Fed's main way of throttling inflation. 

Of course, this is the exact opposite of what President Trump wants, putting new Fed chairman Kevin Warsh in a very awkward position. 

“We see the [Federal Open Market Committee] raising the federal funds rate in July, after pivoting to a tightening bias at its meeting this month,” Ed Yardeni of Yardeni Research predicted. “That would be appropriate given the resilient economy, stable labor market, and rising inflation.”

Jim Reid and his team at Deutsche Bank also noted that “speculation about a potential Fed rate hike continue[s], with futures taking the probability of a hike by December up to 71% by the close [of business on Tuesday]."

CME’s FedWatch index, which tracks Fed funds futures prices, puts the probability of the Fed keeping rates on hold in June and July at greater than 90%. But, for September, the dissenting bets move to the upside: 27% of speculators think the Fed will have raised rates by then (as of yesterday).

• But wait! Vanguard senior economist Adam Schickling thinks the number will be only 20,000. That’s far, far below the consensus range. Why? “We expect a partial unwind from the strong Jan-April jobs numbers that were biased by unseasonably warm and dry weather [and]…employment data from Vanguard’s 401k enterprise (2.5k firms, 5m workers) shows a continuation of lower hiring among large employers alongside a notable decline in layoffs.”
• That’s a big, bold call and we’ll find out on Friday if he’s right.

LOOKING FOR AN OFF-RAMP?

The White House and Israel send new test-signals about ways to end the conflict with Iran

President Trump has told White House aides that he won’t reignite full-scale conflict with Iran unless U.S. troops are killed—another sign that the president is seeking a de-escalation of the conflict, according to the Wall Street Journal.

Israel and Lebanon agreed a new ceasefire that is "contingent on a complete cessation" of attacks by Hezbollah, the Iran-backed terrorist proxy group, the BBC reports. The agreement came after Israeli strikes in southern Lebanon and Hezbollah rocket attacks on northern Israel.

MORE FROM FORTUNE

CEO says anyone who works from home is grabbing groceries or at the vet 30% of the time—and shows off his busy office at Friday 5 p.m. to prove it - Orianna Rosa Royle

Inside the $9 billion World Cup: How Gianni Infantino built a FIFA-dom with a tight grip on soccer’s biggest global event - Vivienne Walt

Republicans defy Trump in shock move, passing resolution in Congress to limit Iran war powers - Lisa Mascaro

This NYC bar just covered everyone’s tabs because the Knicks won, and used Kalshi to hedge their bets - Catherina Gioino

Exclusive: Nvidia snaps up Kumo AI in latest acquisition - Sharon Goldman

CHART OF THE DAY

ChatGPT was the fastest app to reach 1 billion users—but Claude may be eating its lunch

OpenAI’s ChatGPT acquired 1 billion monthly active users just three years after its launch, according to Sensor Tower. That was far faster than Messenger, TikTok, YouTube or Instagram, which all took five to eight years to get to the 1 billion MAUs level.

Anthropic’s Claude may only have a fraction of ChatGPT’s users, just 56 million according to Sensor Tower, but in Q1 2026 something changed. “ChatGPT users who installed Claude in 1Q26 spent 5% less time on the former one month post-install,” the market intelligence firm claims.

NUMBER OF THE DAY

$7.6 trillion

The amount of capex that Goldman Sachs expects will be spent on AI compute, data centers, and power from 2026 to 2031.

THE FRONT PAGES TODAY

Partners Group warns it could cap more fund withdrawals after triggering private equity rout - CNBC

Trump’s empire of debt - FT

The Meltdown Inside ‘60 Minutes’ - WSJ

Glazer Family Members Debate Manchester United Stake Sale - Bloomberg

House Votes to Rein In Trump on Iran War, in a Bipartisan Rebuke - NYT

ONE MORE THING

Who are the mystery men sneaking in and out of New York’s sewers in the middle of the night?

New York police are hunting a group of seven people who, for unknown reasons, popped out of the sewer system in the middle of a road in Brooklyn and then disappeared in the middle of the night. “Some wore headlamps and carried what appeared to be shovels and other tools,” the AP reported. In another incident in Queens, three people stopped traffic to access a manhole cover.

You can see video of the incident here, and CBS News notes that the previous week eight men were seen entering a different sewer hole at 1 a.m. and then re-emerging nearly three hours later. 

Last year, police charged three people with burglary and criminal mischief for sneaking around in the sewers. One of them claimed he was “looking for treasure."

Fortune is happy to add to the idle speculation: The NYPD should check whether these sewers are near any local banks or jewelers. In April of this year, and previously back in 2020, two teams of robbers held up banks in Naples and Milan before making their escape through holes in the floor…which led into the sewer system.