Good morning,

Coming out of the weekend equity markets opened higher after a détente with Iran helped oil prices reverse some of the recent move higher. President Trump decided against an escalation with the hopes that a diplomatic resolution could be achieved though he has said that the window for that 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 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 just ahead of the open 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 and other semi-equipment stocks sold off sharply. The S&P 500 gapped up to its 50d ma, but the index reversed about 100pts in the first hour of trade retesting Friday’s lows before stabilizing. The index ended the day unchanged, but the equal-weight version closed higher by 0.75% while other small and midcap indices also ended with modest gains. Communication services, consumer facing companies and financials led to the upside. Within tech software snapped back >3% after getting crushed last week. Time will tell whether this is just another short covering rally or if the sector is finally finding some interest after the recent results have not fit the prevailing doomsday narrative.

The tech wreck continued overnight with tech heavy indices in Asia selling off sharply. However, S&P futures have been improving throughout the morning trading slightly higher. Ahead of tomorrow’s Fed meeting it is a very busy day of earnings. Tech stocks remain under pressure in the pre-market since the close there have been multiple earnings updates. The numbers continue to point to very strong demand, but the stocks are largely getting hit given the very high expectations (GLW/AMKR/SANM). The results elsewhere also skew positively. Oil prices continue to move lower as President Trump suggests talks are ongoing and there are reports that Oman has presented Iran with a proposal for voluntary fees in the Strait. President Trump is meeting with Zelensky and Netanyahu at the White House this morning. S&P futures are slightly higher while Dow futures are up nearly 1% helped by strong earnings from Coca-Cola (+4%) and Sherwin Williams (+7%). J&J is also trading higher after announcing a talc settlement.