As relief rallies go, yesterday was a good session, but there is still a lot of ground to cover and even more artificial intelligence (AI) histrionics to untangle. I like that Consumer Discretionary (XLY) came on strong, led by automakers. Overall, it was a session that fell within the new paradigm of capital-intensive versus non-capital-intensive names.

The New Moat

I’ve written about moats recently, but now it's all the rage and has even spawned new acronyms. The bottom line is that companies that have spent a lot of money building their moats have a better chance of fending off any AI  threat. Capital-intensive names are also surging on the notion of improved return on invested capital.

I am concerned about the action in Financials (XLF), which is more than a drag from private equity, and a potential cap on credit card rates.

Betting on America

It's great to see American CEOs brag about investing in America, and while Apple CEO Tim Cook's post represents a drop in the bucket for the company, it's encouraging.

Shares of Apple (AAPL) were up 2.4% yesterday, bringing the gain to 1.1% for 2026. This stock is up more than 25% over the past year, and 117% over the past five years.

I think capital expenditures (capex) companies will be handsomely rewarded by the market at some point this year.

Perhaps, after the close.

NVDA in the Batter’s Box

Nvidia (NVDA) shares have edged up more than 6.0% since the last release, but the stock has struggled to find traction directly from earnings. Ironically, the last time the stock rallied in the days after posting results, the company missed on the top and bottom lines.

President Trump talked about hyperscalers paying for power costs for their data centers last night during the State of the Union address. It will be a small price to pay for the computing capacity they will wield.

Today’s Session

The State of our Union is strong.

That statement is true, but so is division and the imbalance of wealth distribution. This will play a great role in the midterm elections.  I think momentum on Main Street will be solidly to the upside regardless of the actual level. 

The stock market could play a pivotal role in this as well.  It must avoid a normal midterm pullback.  That’s not to say the market could move up in a straight line, but pullbacks must be quick and shallow.  That means the Mag Seven needs to participate.

The good news is they are looking attractive at current levels.  It’s the antithesis of irrational exuberance. Nvidia (NVDA) will set the tone after the close, but other companies must help, including Microsoft (MSFT), which is 30% off their all-time high levels.

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