US equities were mixed yesterday following Tuesday’s Tech and momentum-driven weakness. Oil prices continued to be under pressure with ICE Brent breaking below its 200d ma. This finally woke up Treasury markets with yields falling between 5-10bps across the curve. These two factors sent housing and travel related stocks sharply higher. The S&P 500 fell slightly while the equal-weight rose 0.7% and Russell 2000 rose 0.4% as we continued to see a significant rotation. Tech tried to rally earlier in the session but faded as we hit the afternoon, though it managed to close off its lows ahead of Micron earnings after the close.

The company blew away estimates and provided exceptionally strong guidance. The stock was up nearly 20% overnight, which just took the stock back to where it closed on Monday, but has given back some of those gains . The results unequivocally show the supply-demand imbalance in memory as AI continues to drive demand across industries: auto, consumer, robotics, etc. Management sees industry tightness lasting beyond 2027, while discussion of 16 SCAs (Strategic Customer Agreements) addressed the durability of that demand and revenue.

The Micron earnings helped tech stocks bounce overnight. It was also a very busy morning of economic data which showed resilient consumer spending, elevated (though not out of hand) inflation and a solid labor market. The better than feared inflation data helped yields at the front end move lower and the USD to pullback from the overnight highs. This helped Russell and Dow futures firm up. However, shortly before the open the other side of the Micron trade veered its head. Just before the open Apple (-5%) announced it was increasing prices significantly across its suite of iPads and MacBooks. This wasn’t completely out of left field as Tim Cook suggested price increases were coming in a recent interview. The company said, “The consumer electronics industry is facing an unprecedented challenge. The rapid expansion of AI data centers has created an extraordinary surge in demand for memory and storage. We have never seen a component price increase this much, this quickly.” Over the last couple of months markets have clearly taken note of the zero-sum game as the hyperscaler spending accretes to the memory/semiconductor suppliers. This is now starting to seep into electronics markets as well, Microsoft also noted that memory/storage costs are up 2.5X for their Xbox and raised prices again.