Oil prices surge to two-week winning streak as Iran supply fears grip markets
The Dow broke through 50K for the first time in history on Friday, rising over 1,200 points (+2.47%). It was outpaced by the Russell 2000, which rose 3.6%. The S&P was up 2.0%, the even-weighted S&P was up 1.9%, the NASDAQ +2.2%. Bringing up the rear was the Magnificent 7 at +0.5%.
There was no particular triggering event to point to, other than the fact that the economy was doing well, earnings were strong, and the recent trends had not been reflective of these positive trends. In the bigger picture, it was a catch-up move in longer trends, where on an LTM basis the Dow still trails at +12.5%, to the S&P’s 14.7% and the NASDAQ’s 17.4%. The even-weighted S&P is up 11.4% LTM, the Magnificent 7 is up 16.3%. The Russell 2000 is up 16.0%. The NASDAQ LTM strength is helped by semiconductors, up a huge 62.7%, and the Russell 2000 by microcaps, up 26.9%. All these returns are well above long-term trends.
Today tech leads again, with semiconductors +1.2%, and the Magnificent 7 +0.6%. The indigestion of increases in the massive AI spending translates into the hardware needs required, and there seems to be faith that Mega Tech knows what they are doing in pouring so much money into building out the massive data centers. There remain doubts as to the timing of the return on the huge investment, as well as the apparent restraint on coming up with the needed power supplies, but we’re already seeing significant job reductions due to the efficiencies of early implementation of AI solutions.
Interest rates are mixed today, with the shorter end of the yield curve lower, the US 2-year down 1bps to 3.48%, and the longer end trending higher with the 10-year +1bps to 4.21%. Bets for a rate cut in Jerome Powell’s last 2 meetings are on the rise but still remain unlikely (18% in March, 31% in April), while a cut in June is now over 50%, and a 2nd cut in July is up to 32%.
On the commodity front, gold has risen back above $5K and silver back above $80 while copper is flat at $5.93/oz. Crude oil is back above $64/bbl, natural gas is back down to $3.20/mcf, flat for the trailing month, and gasoline keeps rising, now almost $2/gal, the high for the year, up 11.7% in a month. Energy equities are up 19.1% YTD, the leading sector. Crypto is soft again, with Bitcoin back down to $69.3K, down 24.7% in a month.
Earnings season rolls on, but most of the biggest companies have already reported. Next week, we get Walmart (WMT), and NVDIA (NVDA), the last of the Magnificent 7, does not report until the 25th. It’s been a generally positive season with average top line beats and above-average bottom line beats.
As the trading day rolls on, the major indexes have all moved out of the red and are firmly in the green, and the VIX is moving steadily lower. The NASDAQ is in front, led by semiconductors with NVIDIA up 3.5%. Momentum and growth names are reasserting themselves, though still trailing YTD. The trend remains positive.