Author: Deep Tide TechFlow

On Tuesday, Wall Street was hit by a hotter-than-expected CPI data right at the market open.

The April CPI rose 3.8% year-on-year, the highest since May 2023, while the market had initially expected 3.7%. The core CPI increased 2.8% year-on-year, also higher than the expected 2.7%. This figure is already bad enough, but what makes it worse is the logic behind it: the main driver of renewed inflation is energy, and the source of rising energy prices is Iran.

The Strait of Hormuz remains nearly paralyzed, as Saudi Aramco CEO Nasser warned that the market is losing about 10 million barrels of oil supply each week; if the deadlock continues, normalization will have to wait until next year. The day before the CPI was released, Trump had already characterized Iran’s ceasefire agreement as "life support" and called Tehran's counter-proposal "garbage." CNBC further revealed at noon that Trump is seriously considering resuming military action against Iran.

Higher inflation, higher interest rates, and looming shadows of war, these three events stack up, and according to textbooks, one would expect a triple whammy for stocks, bonds, and commodities. But the market today did not follow the textbook.

US Stocks: Dow Jones Turns Positive, Nasdaq Reverses April Gains

The Dow closed up 56.09 points at 49,760.56 points, a gain of 0.11%. It's a very "reluctant" positive close, having dropped as much as 255 points during the day, only to recover slightly before the close to make a toe-dip into the green.

However, the S&P 500 fell 0.16% to 7,400.96 points, and the Nasdaq dropped 0.71% to 26,088.20 points. The Russell 2000 at one point fell over 2%, but narrowed its losses by the close.

This is a market propped up by defensive stocks. Walmart rose 2.15%, UnitedHealth 2.06%, JPMorgan 1.68%, and Merck 1.48%, a classic "inflation means buy essentials and healthcare" combination.

What was sold off were the two hottest stories on Wall Street over the past two months: AI and semiconductors.

Micron fell 3.6%, shedding a small portion of last week's 37% and last month's 53% gains. AMD dipped 2%, Qualcomm plummeted 11%, which was particularly striking given Qualcomm's 39% rise in April. SanDisk dropped 4%, Intel fell 4%, and TSMC was down nearly 2%. Among the 11 sectors of the S&P 500, technology stocks led the decline down 1.5%, with consumer discretionary down 0.93%, industrials down 0.4%, and materials down 0.2%.

Zooming out a bit: Today, the Nasdaq and Russell narrowed their intraday drops from over 2% down to less than 1%; this V-shaped reversal itself indicates that both buyers and sellers are still present in the market. No one wants to truly sell out their chip stocks, but every time they reach this level, some chips are passed out of the door.

The VIX rose 6.9% to 18.38, just enough to keep people awake but not quite alarming. The 10-year Treasury yield continues to rise with oil prices, which is the real trouble for tech stocks: the discount rate has returned to a level they dislike.

David Einhorn told CNBC on the sidelines of the Sohn Conference that he admits to missing the V-shaped rebound of the past six weeks but still believes that stock market valuations are "very, very expensive." This statement sounds like a hindsight call now, but remember, the last time we saw a combination of "index at historic highs but 50% of components below the 50-day moving average" in the S&P 500 was from December 1998 to March 2000.

Oil Prices: Surpassing $100, "Ceasefire Agreement on Life Support"

On Tuesday, WTI crude for June delivery surged 4.19% to $102.18 per barrel, Brent rose 3.4% to $107.77 per barrel.

This is a candlestick written on the face of inflation.

The ceasefire agreement signed in April has been leaking since day one. Ten weeks have passed, and the Strait of Hormuz, a vital passageway for 20% of the world's oil supply, remains functionally closed. Trump's terms like "garbage" and "life support" approach a warlike tone in diplomatic parlance, and reports suggest that the Pentagon is reassessing two proposals: "using force to open the Strait of Hormuz" and "escorting commercial ships."

The last time oil prices stood above $100 was during the war outbreak days in early 2026. Standing there again today, the market faces a more discomforting reality than before: this war is not a short-term event; it is becoming a new baseline price of normalcy.

The immediate beneficiaries are energy stocks. The XLE energy ETF rose 2.6%, making it the best-performing sector of the day. But this cost is already recorded in the CPI report: the 0.4 percentage point jump in April inflation was largely due to energy.

Barclays has raised its oil price target to $100, while the Saudi Aramco CEO's remark about "losing 10 million barrels a week" still echoes in market ears. If this continues, getting oil prices back below $80 this year will require a ceasefire, not a technical correction.

Gold and Silver: Even Safe-Haven Assets Can't Escape

If there’s any data that can shatter the simple logic of "inflation is a friend to gold bulls," it’s the performance of gold and silver on Tuesday.

Spot gold fell 0.82% to $4,704.25 per ounce, dipping below $4,690 during the day. Silver dropped to $84.53 per ounce, a decline of about 1.09%, after a more than 6% surge the previous Monday.

Why did gold and silver fall?

First, the dollar rebounded. With the CPI exceeding expectations, the market quickly removed "rate cuts this year" from the probability distribution. CME interest rate futures show that traders are now pricing in over 70% probability of a rate hike before April 2027, and interest rate cuts this year are "basically ruled out." A stronger dollar translates to weaker gold and silver.

Second, real interest rates are rising. The yield on the 10-year Treasury rose alongside oil prices and inflation expectations. Gold has no coupons, and it always hedges against real interest rates.

Third, silver's industrial properties backfired. Silver has never been a purely safe-haven asset; it is also an industrial metal. On Monday, its 6% rise was supported by a dual logic of "AI data center copper demand spillover + safe-haven," but on Tuesday it was slapped back to reality by "recession worries."

However, the other side of the story is: gold is still up about 43% year-to-date and has risen $1,463 per ounce over the past year. This pullback appears more like a healthy profit-taking rather than a trend reversal.

Cryptocurrency: Bitcoin Falls Below 80,000

According to CoinGecko data, Bitcoin dropped to around $80,389 on Tuesday, eventually hovering near the $80,000 mark. Notably, just on the Monday open, BTC was reported at $82,164, the strongest opening price since January 31 of this year. It took only one trading day to go from "strongest opening" to "falling below 80,000."

Ethereum fared worse. It opened at $2,339, at one point falling 3% to $2,259. Wu Blockchain cited internal predictions from Fundstrat, indicating that ETH could fall to the $1,800–$2,000 range in the first half of this year, with Tuesday’s price now only 10% away from that range.

The global total crypto market capitalization is about $2.77 trillion, down approximately 1.4% in a single day. Bitcoin's market share remains at 58.3%, and in a falling market, "BTC's dominance" usually means altcoins suffer even more.

The sell-off was triggered by several overlapping factors:

First, the switch for macro risk appetite was turned off. With the CPI breaking 3.8%, no hope for rate cuts, and oil prices exceeding 100, all unfavorable factors for risk assets piled up on the same day. Crypto is always at the furthest end of the risk appetite curve.

Second, a chain reaction of leveraged liquidations. Market analysis shows that BTC triggered systemic liquidations after breaking below the key 85,000 support level, the 100-week moving average. During periods of thin liquidity, forced liquidation of leveraged positions can self-amplify, with each spike triggering the next.

Third, the "tap" issue for ETFs. The speed at which institutional money enters crypto through ETFs has clearly been slower this year compared to last. Since the beginning of the year, net outflows from US spot Bitcoin ETFs have been about $4.5 billion, the worst start since their launch in January 2024. This means marginal buying is weakening, leaving fewer buyers to catch the falling prices.

The only "good news" is at the political level: the Senate on Tuesday voted 51 to 45 to approve Kevin Warsh's nomination to the Federal Reserve Board, and there is a general belief that Warsh is friendlier towards crypto. But this good news obviously couldn't save today's market, which is more concerned not about what happens after Powell leaves office on May 15, but rather how much higher oil prices will go in the next few days.

Today's Summary: The Taste of Stagflation is Back

On May 12, the market was weighed down by three data points simultaneously:

US Stocks: The Dow rose 0.11% due to defensive stocks, the Nasdaq fell 0.71%, and AI and chip stocks began to take profits in the first wave.

Oil Prices: WTI surged 4.19% to surpass $102, "the ceasefire agreement is on life support."

Gold: Unusually fell 0.82% to $4,704, as the dollar and real interest rates rebounded, even safe-haven assets couldn't escape.

Crypto: Bitcoin fell below $80,000 to a low of $80,389, while Ethereum plunged to $2,259.

The market is now only concerned with one question: has stagflation really arrived?

If real signals of de-escalation in Iran emerge in the next two weeks, such as a resumption of ceasefire negotiations and the reopening of the Strait of Hormuz, oil prices will likely fall first, CPI expectations will ease, and risk assets will collectively rebound, with crypto being the most elastic segment.

If Trump genuinely issues a command to resume military strikes, hitting oil prices at $120 would not be far-fetched, and the S&P 500 would need to step down to the next level, with Bitcoin's $70,000 becoming the next support level to be tested.

But at least today, one signal is very clear: when both safe-haven assets and risk assets fall at the same time, the market is re-pricing an even more uncomfortable reality — the purchasing power of the dollar itself is being diluted by inflation, and the Federal Reserve has no bullets left this time.