Good morning and Happy Friday. Yesterday, Tech weakness brought the S&P 500 down 0.5%. However the equal-weight rose 1% as breath was solid and 8/11 sectors were higher. The tech weakness was sharply focused on semis (NYSE Semis Index -5%) and memory names (DRAM -9%). Late in the day news that Alphabet was delaying the latest version of its Gemini AI model sent shares, which were trading around unchanged, sharply lower, finishing down -4%. On top of that, Chinese startup Moonshot announced the launch of its Kimi K3 AI model on social media just after the Google news. It’s supposedly the world’s largest open-weight AI model, with performance comparable to higher performance US models. Treasury yields were unchanged on the 2y and slipped ~3bp on the longer tenors as crude fell about 1%.

Tech is once again week this morning and it’s an options expiration day. The DRAM ETF is down another 4% in the pre-market. The hyperscalers are down around 2% as is the IGV software ETF. Like yesterday though, most of the sector ETFs are trading flat to higher in the pre-market, led by Energy, Utilities and Staples. The US continued to strike military targets in Iran as the re-escalation continues, keeping crude bid. S&P futures are down around 1% as are Russell futures. Netflix is down 10% after reporting last night. Today is an options expiration, so keep that in mind.

The Nikkei dropped 4%. Kioxia hit a limit-down (-16%), putting its weekly loss at over 30%. South Korea was unchanged only because it was closed for a holiday. In China Hong Kong outperformed Shanghai but snapped a 5-day winning streak as all major indexes were sharply lower. Memory chip maker CXMT IPO’d, selling, raising ~$10B at an $85B valuation. Shares will not start trading until July 27, however. European indices are faring a bit better due to their smaller tech weighting but are still broadly lower.