Oil prices surge to two-week winning streak as Iran supply fears grip markets
Uncertainties around AI are creating volatility in multiple ways. In addition to accelerating layoffs of jobs replaced by AI solutions, software continues to sell off as advances in quick AI solutions threaten all but those players with major moats around their client relationships. The build-out demands of the massive data centers have spiked the shares of memory chip makers, but have brought a valuation hangover to early winners in other chip makers. Quantum computing continues to make inroads and may change the landscape if fully realized, especially security issues where quantum systems are seen to be able to defeat current security ciphers, including blockchain. It’s a fast-moving situation, though it will still likely lead to marked improvement in labor productivity and higher profit margins.
This morning, the only major indexes in the green are the Dow and the even-weighted S&P. Both the NASDAQ and Magnificent 7 are now negative YTD. The S&P is up 0.9% while the even-weighted S&P is up 4.6% YTD, reflecting the underperformance of Mega Tech. The Dow is up 3.2%, while the Russell 2000 is still leading, up 6.3% (albeit down 0.5% is the trailing week). The VIX ran up to 19.1 on the open from yesterday’s close of 18, and remains at 18.8. YTD, the only sectors in the red are Financial Services (-2.3%), Technology (-1.3%), and Healthcare (-0.5%). Double-digit winners YTD include energy (+15.6%), basic materials (+11.8%), and consumer staples (+10.5%).
Interest rates are flat today with the US 2-year at 3.57%, the 10-year 4.27%. International yields are also flat. The US dollar index 0.25 higher at 97.55, up 1.3% in the trailing week.
Precious metals are volatile today with gold rising as high as $5,113/oz then falling to $4,939. Silver from $92.0./oz to $86.5. Copper has dropped 2.7% to $5.92/oz. Energy prices are flat today with crude oil at $63.20/bbl.
Crypto continues to slide with Bitcoin down 3.7% to $73.9K, now down 26.4% LTM. Ethereum is down 4.2% and is down 31% LTM. Even if regulatory clarity is passed, at this point many investors may be cautious about investing in such a volatile asset class.
On the earnings front AMD (AMD) had solid beats top and bottom but had lower than expected data center business and rising expense levels. The shares are down sharply -15.9% (-4.9% YTD, +70.4% LTM) , the worst day in years, and has sent a shiver through hardware makers. Semiconductors are down 3.9% today, including NVIDIA down 3.1%. Eli Lilly (LLY) had a huge beat on the top and a solid beat on the bottom and raised guidance. The shares are up 9.8%, +2.6% YTD, +33.7% LTM. Tonight we get Alphabet (GOOG) and tomorrow Amazon (AMZN).
As the trading day rolls on the Dow is holding onto its gains, as is the even-weighted S&P, while the NASDAQ has fallen to down more than 1% and the Magnificent 7 is down 0.9%. The S&P had broken below 6,900, down 0.3%, and the Russell 2000 is down 0.8%. The correction in tech is in part due to high valuations and stubborn interest rates. The Dow is close to a new all-time high as is the even-weighted S&P. The trend remains positive and no one will be surprised if tech rebounds after the current correction.