Pinpoint Markets, 5.2.2026: Stocks detach from the real economy

Shareholders party while drivers reel, two-thirds of the economy shrinks and Spirit Airlines goes bust.

7 things worth knowing:

Stocks defy gravity. It’s hard to think of a time when the stock market levitated so far above the real economy. The Trump energy crisis is stoking inflation and causing lots of pain for businesses and consumers. Yet stocks are hitting record highs and basically blowing off concerns about the energy crisis. There are two questions: Is it real? And can it last?

On the first one, the stock rally is definitely more real than the dot-com boom of the late 1990s, which led to the dot-com bust of the early 2000s. Stocks are going up because earnings are strong and analysts keep raising their expectations for future earnings. These are not phantom companies that might be profitable someday, like many of the dot-com darlings were. These are profit juggernauts such as Alphabet, Apple and Microsoft, which faced rigorous earnings expectations this week—and exceeded them. These companies are both investing heavily in the artificial-intelligence buildout, and benefiting from it.

Here’s what Microsoft CEO Satya Nadella said this week: “We are at the beginning of one of the most consequential platform shifts that will change the entire tech stack.” If Nadella is right about the AI revolution being at the beginning, it makes sense that stocks would be roaring.

[These 8 charts explain why stocks are rallying in the midst of a war.]

Can it last? The AI transformation will definitely be lasting. Nobody knows if stocks are in a short-term bubble. But the fundamentals look pretty good. Patrick O’Hare of Briefing.com points out that the estimated growth rate of first quarter-earnings has soared from 12.5% a few weeks ago to 27.2% now. And it’s not just tech. “The salient point is that the earnings growth in other sectors has been much better than expected,” O’Hare wrote on May 1.

Skeptics ask how stocks can be soaring in the midst of an energy crisis. There’s another way to look at it: Without the Iran war and lofty oil prices, stocks would probably be doing even better.

For the week, stocks gained around one percent, with the S&P 500 and NASDAQ both hitting new record highs on May 1. From now on, our Saturday market summary will include charts showing stock returns by sector, based on data from S&P Global. It’s fun to look at how different industries rise and fall over time.