The worst month for stocks started according to plan yesterday. The S&P 500 fell 0.7%, equal-weight -0.8% and Russell 2000 -1.2%. The re-emergence of Middle East hostilities over the weekend continued into Tuesday after Iran struck two tankers and the US responded with strikes on IRGC targets later in the day. Oil rose 5%, treasuries rose 3-5bp and gold, silver and bitcoin fell 2-4%. Energy led as expected with oil’s strength, while the defensively-oriented Utilities, Healthcare and Staples also saw gains. Discretionary lagged, and Industrials, Materials and Tech sectors also fell 1%-plus. Economic data including ISM Manufacturing and JOLTS didn’t lean too meaningfully to either the Bull or Bear side.

As my kids woke up this morning to 1) get ready for their first day of school (including a new middle-schooler) and 2) celebrate a birthday, US equity futures were lower, along with the rest of the globe. The US attacked two Iranian tankers as part of the larger strikes yesterday, marking a new “tanker for tanker” policy that would ratchet up the US blockade currently in effect. Losses were modest however and futures bounced off their lows to turn positive as Treasury yields moved lower. The S&P 500 opened flat but marched higher throughout the morning. We're sitting just below the HOD, up around +0.5%, trying to fill yesterday's gap down. Breadth is solid with the equal-weight outperforming and small caps leading. Every sector is flat or higher outside of Real Estate.

Oil has moved around. It reached an overnight high ~$97 and testing its May highs before reversing for most of the morning. Around 10am it began to climb again as Russian officials said that talk of OPEC+ quota cuts were not happening now and oil demand is recovering. The OPEC+ meeting this Sunday will note make any output decisions and only discuss market conditions. Chevron signed an agreement to expand its operations in Venezuela. Natural gas is higher as well. Gold is modestly higher, reclaiming the 100d ma/$4400 level. Copper is unchanged, looking to hold its 50d after a run to record highs. Crypto continues to consolidate late August’s sharp rally. Ag is mostly lower.