Wall Street called 75K jobs. The number came in at 177K.

Corporate Overview

The first week of May delivered a labor market gut-punch to rate-cut bulls: 177,000 jobs added in April, unemployment steady at 4.2%, and the S&P 500 at fresh all-time highs. The AI trade is back, earnings are holding the floor, and the Fed is in no hurry. Markets are not waiting for permission.

Daly Asset Management runs systematic, data-driven strategies with no hidden fees and no consensus hand-holding.

Stock of the Week

Ticker: AGNC | Sector: Mortgage REIT / Financials | Market Cap: $12.31B | Yield: 13.43%

Why Now:

AGNC Investment Corp. is a mortgage REIT that profits from the spread between what it earns on agency mortgage-backed securities and what it pays to borrow. The setup right now is as clean as it gets for this business model.

Q1 2026 EPS of $0.42 came in ahead of the $0.37 consensus forecast, and more importantly, that $0.42 figure was up $0.07 from Q4 2025, driven by a 25 basis point widening in net interest spread. The dividend sits at $0.36 per quarter, meaning recurring earnings covered the payout with room to spare. That is not a small margin of safety for a 13%-yielding REIT.

The headline comprehensive loss of $(0.18) per share sounds ugly, but that number is dominated by unrealized mark-to-market losses on MBS driven by geopolitical volatility in March, not by deteriorating cash flow. Tangible net book value largely reversed its Q1 decline in early April, recovering approximately 6% as mortgage spreads stabilized. The portfolio itself is not broken; it got repriced by noise that is already unwinding. Yahoo Finance

Management guided net spread and dollar roll income to the "high 30s to low 40s" range over the near term, supported by improved TBA implied financing levels and easing repo pressures. At the current share price of $10.75, AGNC trades at a modest premium to its recovering book value, which is justifiable given the dividend coverage and the macro tailwind of a still-inverted-but-improving rate environment.

Risks:

First, rate volatility is not gone. If the Fed pivots hawkish or geopolitical shocks re-widen MBS spreads sharply, book value takes another hit before cash flow can compensate. Second, leverage stands at 7.4x tangible equity, which amplifies both gains and losses. Any liquidity seizure in repo markets would pressure AGNC harder than lower-levered peers.

Verdict:

AGNC is a high-yield cash flow machine with earnings comfortably above its dividend, a recovering book, and a macro setup that favors the trade. For income-focused investors who understand the structure, this is a buy at current levels.

Market Snapshot

The most notable divergence is the continued outperformance of tech-heavy indices (Nasdaq +3.41%) relative to the blue-chip Dow, which barely eked out a weekly gain. This "two-speed economy" is being driven by a significant rotation back into growth and AI-linked equities.

Additionally, the sharp decoupling of equities from energy is prominent; while stocks hit record highs on strong jobs data and cooling yield pressures, WTI Crude plunged over 7% as geopolitical risk premiums began to fade.

Market Commentary

Jobs Beat Wall Street's Doomers, But Don't Pop the Champagne

Pantheon Macroeconomics spent the week warning that April's payrolls would "undercut the recovery narrative," forecasting just 75,000 jobs. The actual print, released by the BLS on May 8, came in at 115,000, well above the 55,000 Dow Jones consensus. Unemployment held at 4.3%. Before you get excited: healthcare drove 37,000 of those gains, transportation and warehousing added 30,000, and the federal government shed another 9,000 jobs. Manufacturing contributed just 2,000, and information technology lost 13,000.

This is not a broad-based hiring surge. It is a healthcare-and-logistics economy with a structurally shrinking government payroll. Average hourly earnings rose just 0.2% month-over-month and 3.6% year-over-year, below the 0.3% and 3.8% estimates, suggesting wage pressure is cooling even as the labor market stays technically resilient.

Chip Stocks Ripped, and It Was Not About AI Fundamentals

The Nasdaq posted its best session in weeks on Tuesday after Intel surged nearly 14% on reports Apple was considering using its foundry operation, and Micron jumped 12% after IDC flagged a potential structural break in semiconductor cyclicality. QCOM soared about 11%, Lam Research surged 8%, and Applied Materials gained 6%. The catalyst was geopolitical, not earnings: Defense Secretary Pete Hegseth confirmed the US-Iran ceasefire was holding. When a chip rally's primary driver is a ceasefire holding for 48 hours, the positioning risk is obvious. These gains are hostage to the next headline out of the Strait of Hormuz.

The Fed's Next Chair Wants to Change the Scoreboard

Kevin Warsh's Senate confirmation hearing this week revealed he wants to replace the Fed's core PCE benchmark with "trimmed average" inflation measures. The argument is that stripping out extremes reveals truer underlying inflation. Bank of America economist Aditya Bhave warned this strategy carries credibility risk: trimmed-median inflation actually exceeded core PCE in 2019 and 2020, which would have pushed for a more hawkish stance than the Fed took. Bhave's bottom line is that Warsh will need to apply his preferred metrics consistently, even when they make the data look worse. Changing the measurement framework mid-cycle is how you lose a bond market.

The Hormuz Blockade Is Now a Global Food Crisis

The energy disruption story widened significantly this week. India, the world's largest urea buyer, locked in 2.5 million metric tons at $935 to $959 per ton, nearly double the pre-war price of roughly $490 per ton. Natural gas from the Middle East is the primary feedstock for Indian domestic urea production, and Strait of Hormuz disruptions forced regional producers to temporarily shutter plants. This procurement arrives just before India's monsoon planting season for rice, corn, and soybeans. Higher input costs for the world's most populous agricultural nation are not a niche story. They are a slow-burning inflation risk that does not show up in trimmed PCE.

Tactical Map

• Mega-cap Tech over Energy: While Brent crude surged to near $110–$120/barrel amid Strait of Hormuz tensions, tech remains the superior hedge as the S&P 500 Information Technology sector posted a dominant 6.5% weekly gain fueled by record profit margins.

• Labor Resilience over Rate-Cut Speculation: The May 8 nonfarm payrolls report of 115,000 new jobs alongside a steady 4.3% unemployment rate reinforces a "higher-for-longer" Fed stance, favoring companies with high cash reserves over rate-sensitive small caps.

•  Selective AI Positioning over General Exposure: Broad market breadth remains narrow, making performance dependent on companies like Apple ($100B buyback) and Reddit that demonstrate immediate monetization of AI through revenue growth, rather than just increased capital expenditure.

Theme to Watch

The UAE didn't consult Riyadh before announcing its OPEC exit — Saudi Arabia learned of it from a press release. That detail alone signals the "OPEC floor" is structurally cracking. The UAE is explicitly "preparing for a world where oil demand is in decline and OPEC's power to maintain discipline will be weaker." When Hormuz reopens, the UAE could flood markets with up to 2 million additional barrels per day — independent of any cartel consensus.

Forward View

• May 12: U.S. Consumer Price Index (CPI) (April)

• May 13: U.S. Producer Price Index (PPI) (April)

• May 14: U.S. Retail Sales (April)

• May 15: U.S. Industrial Production (April)

Final Words

Markets are running on AI momentum and labor resilience, but energy disruption, Fed uncertainty, and narrow breadth demand disciplined positioning over consensus chasing.

Daly Asset Management cuts through the noise with systematic, data-driven strategies and zero hidden fees — because conviction should be built on evidence, not emotion.

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Disclosures: This newsletter is for informational purposes only and does not constitute investment advice. Past performance is not indicative of future results. Always conduct your own due diligence or consult with a financial advisor before making investment decisions.