Last week was a mixed one for equity markets. Semis/memory bounced early in the week recouping some of the previous week’s losses. However, the group ended the week under pressure as investors struggled to come to grips with the increasing Capex guidance from Alphabet and Tesla and strong earnings were met with a sell the news response. As the US and Iran exchanged missile fire and the Red Sea became the most recent chokepoint for oil supplies. ICE Brent traded over $100 but also pulled back on Friday amidst reports that China was pushing for talks to resume. Treasury yields hit new YTD highs ahead of this week’s Fed rate decision with futures starting to price in a one in three possibility of a rate hike. The S&P 500 closed below its 50d ma for the second consecutive Friday though losses were modest with the index down 0.6% for the week. The rotational activity continued with the equal-weight version of the index ending slightly higher. 8 of 11 sectors ended the week in the green with energy, industrials and utilities leading to the upside.

Coming out of the weekend futures were pointing to higher open with oil prices pulling back sharply as US strikes were halted for two consecutive days. President Trump decided against an escalation with the hopes that a diplomatic resolution could be achieved though he has said that the window for a achieving a breakthrough is short. The other big story were the reports highlighting the continued investment by Nvidia to help finance the AI infrastructure buildout with reported potential commitments up to ~$1T since last Friday. This helped the tech complex rally at the open, but that strength was quickly met with selling as the circular financing narrative quickly took hold. Also taking the wind out of the sales was a report from the Information that China had begun domestically manufacturing DUV machines (deep ultraviolet lithography) which would be delivered to local chipmakers by the end of the year. ASML, which has dominated this market, sold off sharply in response with the ADR falling >10% from the pre-market high.

The S&P 500 gapped up a little less than 1% to its 50d moving average but sold off during the first hour of trade giving back all of the gains retesting Friday’s lows before stabilizing. As we head to print, the S&P 500 is down 11pts to 7,401 (-0.2%), the Dow is up 151pts to 52,098 (+0.3%), while the Russell 2k is up 7pts to 2,937 (+0.3%). Most of the weakness is coming from the AI adjacent sectors with semi and memory stocks leading to the downside (SMH/DRAM -4%). The equal-weight version of the index is up 0.5% with staples, comm services, financials and healthcare outperforming.