MW The U.S. stock market is progressing toward a bubble - and here's where the extremes are right now
By Steve Goldstein
Nasdaq-100 volatility surpassed dot-com levels during its latest win streak, Bank of America strategists say
The Philadelphia semiconductor index has become more bubble-like, as South Korea's Kospi already is at extremes, according to Bank of America derivatives strategists.
Talk about a reaction function: it took less than 10 minutes after the S&P 500 closed in the red for President Donald Trump to declare a cease-fire extension. Granted that cease-fire still has the Strait of Hormuz blocked up, and fuel consumers are beginning to act: airlines including Lufthansa are reducing flights as petrochemical producers in Asia begin to scale back operations.
The stock market, however, is in a state of bliss. Bank of America's global equity derivatives team laid out the backdrop in a note to clients.
"Right-tail momentum risks in U.S. equities continue to materialize," they declared. The Nasdaq-100 NDX, they noted, notched 13 consecutive gains on realized volatility that was more extreme than the late 1990s dot-com bubble. The S&P 500's SPX rally similarly rivaled those seen in historically volatile periods like COVID-19, the global financial crisis and the 1987 crash.
"The contrast between the slow grind lower in March and the subsequent breakneck rally highlights the U.S. equity market's pronounced right-tail asymmetry and its longer-term progression toward a more bubble-like regime," they said.
And while the market as a whole isn't yet in a bubble, the BofA team said key pockets like semiconductors SOX are showing increasing froth.
That's as the South Korean Kospi stock-market index KR:180721 (which is led by memory-chip makers), Brent oil (BRN00) and the Bloomberg Commodity Index XX:BCOM already are exhibiting "extreme bubble-like dynamics."
Among popular themes, Taiwan, Brazil, space and digital infrastructure also are showing relatively high bubble-like dynamics, the strategists said.
Like all of Wall Street, the derivatives team has something to sell. On the upside, to keep up with continued momentum, particularly through megacap tech earnings, they like call spreads on the Nasdaq-100 ETF QQQ. A call spread is when an investor pairs the purchase of a call option of a security with a sale of the call option of the same security at the same expiration date.
Their recommendation on the options expiring May 29, is to buy the call with a $665 strike and sell the call with a $700 strike. So an investor would be paying $7.50 to make as much as 5 times the cost.
To protect against the downside of geopolitical turmoil, they suggest buying a VIX VIX call spread for May expiration. Specifically, buying the $24 strike call and selling the $40 strike call, which could return as much as 17 times the cost.
The market
U.S. stock futures (ES00) (NQ00) climbed, and unusually given their relationship since the Iran war, so did oil (CL00).
Key asset performance Last 5d 1m YTD 1y S&P 500 7064.01 1.39% 7.74% 3.19% 33.59% Nasdaq Composite 24,259.96 2.63% 11.48% 4.38% 48.83% 10-year Treasury 4.292 0.40 -4.30 12.00 -10.10 Gold 4778.5 -0.74% 6.11% 10.30% 44.74% Oil 90.46 -1.03% -0.91% 57.57% 45.25% Data: MarketWatch. Treasury yields change expressed in basis points
The buzz
President Donald Trump, just after Tuesday's close, said he would extend the cease-fire with Iran. Iran attacked three ships in the Strait of Hormuz, seizing two of them, according to Iranian reports.
SpaceX says it has the option to buy the coding tool Cursor for $60 billion.
Adobe $(ADBE)$ said it would extend its stock-buyback program by $25 billion.
Deutsche Telekom (XE:DTE) is considering a full combination with its majority owned T-Mobile $(TMUS)$ U.S. arm, according to a Bloomberg report.
Tesla $(TSLA)$ and IBM $(IBM)$ results are due after the close.
Related: Here's what will really matter to Tesla investors when the company reports earnings
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The chart
A senior economist at the U.S. Census Bureau, Lee Tucker, looked into the topic of the day, whether artificial intelligence will impact the jobs market. His research paper, titled "You're Not Hired," found that employment of early career workers in the most AI-exposed quintile declined by 15% following the introduction of ChatGPT.
Top tickers
Here were the most active stock-market tickers on MarketWatch as of 5 a.m. Eastern.
Ticker Security Name NVDA NVIDIA TSLA Tesla BYND Beyond Meat AMZN Amazon.com GME GameStop AMD Advanced Micro Devices MSFT Microsoft AAPL Apple TSM Taiwan Semiconductor Manufacturing PLTR Palantir Technologies MSTR MicroStrategy
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Beyond the newsroom
MarketWatch Picks: I'm 83 and lost all my money in the stock market. I get little Social Security, but do have $8K. What's my move?
-Steve Goldstein
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April 22, 2026 06:58 ET (10:58 GMT)
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