The S&P is soft. The Nasdaq is leading the decline for a second straight session. Tech is still the weak spot.

The overnight story helped. Trump called off a planned strike on Iran after three regional leaders intervened. Oil pulled back from Monday's levels. But the relief hasn't reached bonds. Yields are holding near their recent highs.

That's the disconnect. The risk premium in crude is easing. The risk premium in rates is not. Monday made this clear. The Dow closed higher. The Nasdaq dropped. Energy, staples, and financials led. Seagate (STX) fell sharply. Its CEO told a JPMorgan conference that new factories would take too long to build. Micron (MU) followed it down.

The tape is telling you something. Risk appetite is rotating, not expanding.

Market Implication

Iran de-escalation removes one inflation input. It doesn't remove services inflation, which reflects wages, rents, and demand. That doesn't reverse when the Strait reopens. Until rates come in, the rotation from growth to value has structural support.

The new Fed chair was supposed to be the market's friend. Trump picked him to cut rates. The committee he inherited won't let him.

The April FOMC meeting had four dissents out of twelve voters. That's the most divided the committee has been since 1992. Wholesale prices are running well above target. Oil is still triple digits. The rate market has repriced from expecting cuts to flirting with hikes. All of this happened in under a month.

Warsh wanted what he called a "good family fight" at rate-setting meetings. He's going to get one. But the fight isn't between doves and hawks anymore. It's between hold and tighten.

The Memory Ceiling

The AI infrastructure trade hit a wall Monday. Seagate's CEO said the quiet part out loud. The industry can't build capacity fast enough. Factories take years. Demand is here now. The market had priced memory for uninterrupted growth. That assumption cracked. A Samsung strike risk added supply-side pressure.

This isn't a demand problem. It's a supply constraint in a sector priced for perfection.

Structural Setup

The rate path is the variable that everything else hangs on. If yields hold, the rotation toward energy and financials continues. The memory selloff is the first sign the AI trade is hitting a physical constraint, not a valuation one. Physical constraints don't reprice in a quarter. If it spreads from storage to compute, the AI momentum trade isn't pausing. It's re-pricing for a supply constraint that doesn't resolve in one quarter.

The Dow closed higher while the Nasdaq dropped. That split matters.

The leaders tell the story. 3M (MMM) led the Dow. Chevron (CVX) followed. Salesforce (CRM) rallied. They benefit from sticky rates. Their earnings don't depend on multiple expansion.

On the other side, Caterpillar (CAT) lagged. Nvidia (NVDA) slipped again. The VanEck Semiconductor ETF (SMH) dropped. The memory trade is taking a breather.

Large-cap value held. Large-cap growth didn't. That's a factor rotation.

Sector Read

Watch energy vs tech over the next two sessions. If energy holds while tech fades, the rate story is winning. Home Depot's print this morning is the first data point. A weak housing read deepens the value rotation.

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But the positioning has already started. Fed Governor Waller speaks today. His tone matters. If Waller signals openness to tightening, the hike narrative gains ground. If he pushes back, it gives Warsh room.

The Iran story isn't resolved. Trump postponed a strike. He didn't cancel one. The regional leaders who intervened bought time. They didn't secure a deal. Oil pulled back overnight, but the conflict is still intact. Each time the market prices in de-escalation, the next headline pulls it back.

Japan's economy grew faster than expected in the first quarter. That keeps the Bank of Japan on its tightening path. Japanese bond yields are at multi-decade highs. The BOJ-Treasury feedback loop is under-watched. Watch the yen against the dollar. A strengthening yen signals Japanese capital flowing home and correlates directly with US long-end yield pressure.

Watch Signal

Track Waller's tone and Brent's reaction over the next 48 hours. If oil stays below recent peaks and Waller stays neutral, the market gets a window. If either breaks the wrong way, yields resume their climb.

The consensus expects a slight earnings decline on modest revenue growth. That's not the story.

The story is the split between Pro and DIY. Pro tracks contractor backlogs and renovation pipelines. DIY tracks household discretionary spending. Last quarter, Pro comps turned positive and outpaced DIY. That gap has been widening.

If Pro accelerates again while DIY stays soft, it tells you something specific. Homeowners are staying put and renovating instead of moving. That's what happens when mortgage rates lock people in. The renovation cycle becomes the housing market.

The read-through to builders like Toll Brothers (TOL) is direct. If Pro demand is strong, contractor backlogs are full. If DIY is weak, the consumer is tightening.

The Read

Home Depot's Pro vs DIY split is the macro-to-housing bridge this morning. Strong Pro means the renovation cycle is absorbing what the transaction market can't. Weak DIY means the consumer is starting to feel rates in daily spending. If both show up in today's print, the housing complex is functioning but fragile. Fragile at these yields is a very different trade than bottoming.

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Economic Data: ADP Weekly Unemployment Change, Pending Home Sales, API Crude Oil Stock Change

Fed Speakers: Waller, Paulson, Venable

Earnings: Home Depot (HD), Keysight Technologies (KEYS), Toll Brothers (TOL)

Overnight: Nikkei -1.99%, Shanghai Composite -1.02%, FTSE -1.33%, DAX -1.54%

Home Depot's call starts at 9am Eastern. The housing data drops this morning. Waller speaks today. This is a session with answers.

The fork is clean. If Home Depot shows strong Pro demand and weak DIY, the housing complex is bending but not breaking. Yields stay elevated. The value rotation has legs. Warsh's job gets harder. The economy is absorbing rates well enough that the committee has no reason to cut.

If the print disappoints on both lines, the read changes. The consumer is cracking. The housing complex isn't absorbing anything. And the pressure on the Fed shifts from inflation to growth.

One of those outcomes reprices the rate path. The other confirms it. We find out before lunch.