The Dividend Cafe - Tuesday - May 12, 2026

Episode Date: May 12, 2026

Brian Szytel recaps a modest down day in markets after recent all-time highs, noting the Dow slightly positive while the S&P 500 and Nasdaq fell, with year-to-date gains still strong. He explains that high-momentum semiconductor and tech names sold off as longer-duration stocks reacted to higher interest rates, driven partly by rising energy prices; the 10-year yield moved up to about 4.45% and expectations for a Fed rate cut this year have faded. He reviews the latest CPI report: headline inflation came in as expected at 0.6% month-over-month and 3.8% year-over-year, while core CPI was slightly above expectations at 0.4% and 2.8%, with a shelter-data quirk cited. He discusses how elevated oil and gasoline prices tied to Middle East tensions could pressure consumers and earnings, though consumer balance sheets and corporate earnings remain strong. He also notes the NFIB small business survey near 95 and addresses a question about Kevin Warsh’s investment disclosures, dismissing concerns as overblown. 00:00 Market Recap Snapshot 00:51 Momentum Stocks Pullback 01:20 Rates Rise on Oil 01:56 CPI Breakdown Explained 03:17 Energy Shock and Consumers 04:20 NFIB Small Business Read 04:40 Warsh Fed Chair Controversy 06:11 Wrap Up and Tomorrow Preview Links mentioned in this episode: DividendCafe.com TheBahnsenGroup.com

Welcome to the Dividend Cafe weekly market commentary focused on dividends in your portfolio and dividends in your understanding of economic life. Good evening and welcome back to Dividend Cafe. This is Brian Saitel with you here as your host. As always here on Tuesday, May the 12th, on down day overall in markets, we've basically been closing last couple of days at all-time highs. So take one down day for what it is, which is just a blip. And actually, in today's move lower, the Dow was actually slightly positive. So the Dow was actually up 56 points. S&P was down about 15 basis points.

NASDAQ was down about 7 tenths of a percent. On the year, that puts the Dow close to about 375 up, and then you've got S&P up about 8.5% and NASDAQ up about 12 and a quarter. So this is definitely not a bad year here. This is markets that are quite resilient in the face of a whole lot of things. and let's walk through that a little bit. But what sold off today was a lot of the momentum trades. So think about the semis and the semiconductor equipment names.

A lot of those names have just been screaming year to date, and those things pulled back sharply today. And there's a reason for that. A lot of those momentum names and those technology stocks are considered longer duration plays because the amount of time it'll take to have something trading at 50 times earnings to actually grow into that is a longer trade to come to fruition.

And so they tend to be more sensitive to interest rates. Today you had interest rates move higher. Part of that was because of energy prices moving higher. We had die up about 4%. And so you had the 10-year up about four basis points on the day. We're now at about 4.45 on the 10-year yield. And for a very long time, we were in the 420s, if not the low 430. So rates have creeped a little higher.

The odds of a Fed rate cut for this year are basically off of the table. In fact, there's a small chance for a rate hike. And so interest rates have just moved a little higher because of that inflation component of CPI, which is driven by energy. And that was the big news, actually, for the day. We actually did get a fresh read on CPI. And let me break this down for you. Headline was right in line. We got a 0.6 number, so 6 tenths of a percent. If you remember from March, we got a 9 tenths of a percent. So I guess it's moving in the right direction, although annualized, that would be far too high for us to be palatable. But if you look at the year over year number that puts it at 3.8

percent and that's just higher than what we needed to be. Now, all that to say, a lot of that really is because of energy. So when you strip out the volatile things like food and energy and then look at the core number, you also had a higher than expected print, but just marginally by about a 10th. You got 0.4% for the month and then 2.8% year over year. That's without energy. So it's still above the range or the hope for the Fed to get to 2% on the year over year. But it was moved to little higher. Part of that was an anomaly because of a delayed report on the housing front. This was a shelter component that was higher than expected because of the government shutdown of all things, which is so far in the rearview mirror now, it's funny. But nonetheless, it's flowing through to some

of these things and causing some little quirks. All that to say, what I wrote today is just that none of this stuff that we got on CPI today was out in left field. It was all pretty much as expected. But the reality is the longer the skirmish in the Middle East goes on, the longer that oil is essentially at $100 or more. And you've got gasoline prices that are up 40% since the more began, that's since March. That chips away at the consumer's ability to afford other goods and services. And so it does alter the economy. Real question is just how long is it going to stay like this? And then how much of a dent does it put in the consumer's checkbook when they go out and spend?

Because that's going to flow through to the economy that then it will ultimately flow through to earnings. That said, just remember the consumer's balance sheet coming into this spike on energy was very strong, and corporate earnings are very strong. And so you've got this kind of margin of safety built into the economy. And right now, what the stock market is telling you, and what the credit spreads are telling you is that margin of safety on the economic front is enough to be longer lasting than what the perceived duration of this skirmish in the Iran is going to last before the trade gets opened. So that's that. That's where things stand as of now.

And the things out in the economic calendar on the CPI side already went through, but there was also a small business survey. This is that NFIB survey we talk about. It was just below expectations at 95. That was for the month of April. I chalked that up to being pretty good. The long-term average is 92, so we're in fine shape on that front. But there was a question in there today.

It was about an article actually that was from MarketWatch about Kevin Warsh and his balance sheet and the opakness of the investments. He has to disclose everything that he owns and is invested in before he can get confirmed as the next Fed chair. And ultimately, things will have to get liquidated because there's too much of a conflict as far as setting rate policy that affects your own net worth and your own investments. He's got a $150 plus million net worth, so that's great. The current Fed share has something around a $50 million net worth. And frankly, I think it's immaterial to really even consider the fact that these two fellows are successful and have saved some money. The articles that have been written here and there allude to just the opaqueness and his previous firm, which is Stan Druckenmiller's firm, which is a large hedge fund and a family office.

And so hedge funds that he owns are just from his previous employer. I don't have a lot to say about it. I think people that write things like that to try to paint something that is someone's hiding the ball. Would Warsh really be taking the job as the next Fed chair because he can set policy to improve his own hedge fund performance? It's just a silly notion. So he's too smart. He's too qualified. He has too thick of a pedigree to ever even consider something like that.

So now I think we can pretty much discard all of those articles and then move forward for the merit of the person that is being nominated to get the job. And as you can tell him a fan. So that's my comments on that Q&A. It was a good question, though, and I appreciate it. That's my around the horn for you today. But we'll be back with you, obviously, tomorrow. There's some more economic data coming out later in the week. They'll be able to cheat through a lot of that with you.

Reach out with your questions, as always. And if I don't speak to you, have a good night. Thank you. The Bonson Group is a group of investment professionals registered with Hightower Securities LLC, member FINRA and SIPC, and with Hightower Advisors, LLC. A registered investment advisor with the SEC. Securities are offered through Hightower Securities LLC. Advisory services are offered through Hightower Advisors, LLC.

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