New York morning trade, we are looking at the major US stock averages in positive territory with oil pulling back and joining me this morning to weigh in on what's moving markets this morning is Mike Ranking, senior market strategist for the New York Stock Exchange.
Mike, great to have you here.
Thank you so much for joining me.
Good morning.
Thanks for that.
Well, first and foremost on this Thursday morning, we're keeping a close eye on geopolitics over in the Middle East, but we are looking at stocks managing to eke out a gain and.
Moving slightly lower today, but we're coming off the FOMC minutes as well as the NATO summit.
So what do you make of the price action we're seeing?
Yes, so look, I mean yesterday we had kind of the escalation with ships hitting the Strait of Hormuz, kind of the commentary from President Trump, you know that from his perspective that the ceasefire was over, a response by the US, right?
And we've kind of seen some of that continue kind of throughout the Overnight session again today.
Now yesterday we saw a pretty muted response, right?
We saw like that playbook conflict, the conflict playbook sort of play out, but it was in a muted fashion, right?
If you think about where oils come from, you know, well over $100 you know, kind of back into the, you know, kind of mid to low 70s, right?
You know, we bounced yesterday, you know, about 5%, right, but you're kind of still kind of, you know, in that mid 70 range, you're just breaking back above the 200 day for.
For Ice Brent, you know, you looked at kind of the move in the dollar.
The move in the dollar was pretty muted.
You know, Treasury yields were pretty much unchanged, right, so you didn't really see this big flight to safety, you know, sort of move within equity markets.
I think part of that is just kind of the fool me once, you know, kind of, you know, shame on you, fool me twice, you know, kind of shame on me, and markets are not really reacting and they've become desensitized to a lot of what's happening.
In in Iran with the expectation that you will, you're not going to see a major, major escalation ahead of of midterms, um, you know, but the bigger thing that's kind of driving markets is, is really been kind of this rotational activity, you know, that we've seen as we've kind of straddled Q2 into Q3, um, you know, and, and we've, we've seen kind of the ebbs and flows, you know, kind of out of tech broadly into other areas of the market, more defensive areas of the market, you know, but now you're seeing kind of quite a bit of.
Volatility kind of within kind of within the tech sector and there's quite a few headlines this morning that so yes, absolutely.
So let's talk about that, Michael, because in New York morning trade we're looking at microinsurers higher, but we're looking at Salesforce pulling back on the heels of a downgrade.
But there has always been a lot of volatility within the AI trade.
So let's walk through some of the headlines that are driving this market action.
Absolutely right.
So I mean what we've seen on the upside you know kind of in this entire kind of AI Capex beneficiary trade, which is really kind of driven, uh, you know, kind of been the, the, the biggest kind of leadership group in the market kind of over the, you know, the last quarter, um, is, is, you know, you started to see that volatility really expand on the way up and now, you know, that's kind of forcing a little bit of liquidation and you know kind of and and adding to some volatility recently.
Now this morning, so if you, if you kind of rewind the clock a little bit, last week there was a Bloomberg story.
Suggesting that Meta was going to sell some excess compute and that started to really kind of weigh on that kind of AI AI Capex beneficiaries, namely, you know, semiconductors, memory stocks, right, those stocks that come off.
Now yesterday there was a story suggesting that that you know kind of was not correct, right?
And then you also had this morning kind of AI announced kind of along with Broadcom that they were.
Kind of moving forward with their own semiconductor or semi chip, the Irish chip, and then based on their internal memos that they were kind of accelerating their data center spend, right, so you kind of refuting kind of, you know what that story was sort of suggesting, you also had Micron come out and you know, announced that they were kind of, you know, going to be expanding kind of their investment, you know, kind of here in the US right and expanding and and that in Taiwan as well, right.
So that's kind of put a bid back beneath those stocks.
Now on the flip side of that, right, the AI disruption trade has been software you pointed out Salesforce had gotten a downgrade this morning.
There was also a story in Bloomberg highlighting that Starbucks was with the use of AI, um, you know, kind of building some internal systems to potentially replace, you know, legacy software, um, kind of inventory management systems and things of that nature which very much kind of plays in.
To that narrative that's been kind of within the market and weighing on software stocks throughout this year, so you're seeing that divergence once again.
You're looking at kind of semi and memory names up somewhere close to 5% this morning, and then that software side of things kind of down 3 to 5%, but it's kind of very fluid and the volatility is pretty significant.
Lastly, we have a big offering coming this evening.
Right with SK Heinix in the memory sector, right, so we're going to, I think it's going to be really interesting to see how markets kind of trade throughout today's session, right?
Can those chip stocks and do the memory stocks kind of hold those gains, or do people actually use kind of some of this volatility and the upside, the volatility kind of sell the rip, right, kind of movement to lighten up on some of that positioning ahead of what's going to be a very interesting earnings season.
Yes, and you mentioned earnings season, Michael.
So next week. does mark the official start to earnings season.
We'll be hearing from the big banks to kick off the season as well as the financials.
And also next week we'll be getting inflation figures and hearing from Federer Kevin Warsh as well, and this does come ahead of the July Fed meeting.
So there's a lot on tap, especially when we're looking ahead to Tuesday, and you will be joining us again fortunately, so we can walk through those earnings as well as those data points.
But what should investors look ahead to next year?
Yes, look, I mean, I think it's a mix, right?
And so.
The inflation figures are going to be kind of very closely watched from an interest rate perspective.
Clearly we need to kind of pay attention to what's going on in Iran and hopefully we don't see any sort of kind of big escalation on that front.
And then I think we're going to really start to focus.
On that earnings season now to move away from tech, you know, kind of just for a moment, right, like you know what we've seen in Q1 earnings, you know, tech was obviously a blowout, right, but you know the other earnings that we saw from corporations were pretty strong, right, you know, and, and.
What we did see was there was a little bit of a gap in terms of, you know, companies beating estimates but not necessarily raising guidance.
I think one of the bigger questions, you know, kind of for the 493 outside of kind of the mag 7 and the tech trade is whether or not you start to see companies, you know, once again, you know, update us on the current environment which seems like, you know, from everything we've seen has has continued to hold up pretty well, um, and then whether or not they actually. take this opportunity to start to raise guidance, you know, as we've seen a little bit of a de-escalation kind of in Iran up until up until this week, right, so that does raise some questions again, but you know whether or not we're going to see those companies start to raise guidance and narrow some of that gap right to continue to help this broadening trade.
Yes, and finally, Michael, before I let you go, I do want to ask you about energy in particular.
Oil prices.
So I'm sure plenty of Americans out there who are still paying attention to the price of a gallon of gasoline, regular gasoline, they're wondering what is going to happen, especially since we did see a spike yesterday in oil, but we do still remain below $80 a barrel.
Yes, look, I mean I think oil prices are going to probably remain kind of sticky in and around this area there's Going to have to be, you know, some kind of refilling of SPRs and things of that nature, right?
So I think we get a little bit sticky around here, right?
I mean there is definitely a narrative building that, um, you know, with kind of OPEC increasing their quotas and some, you know, demand weakness in, in China that, you know, you could start to see a glut of oil should we get past, you know, kind of this Iran situation.
And move past that that you could start to see kind of a glut of oil and oil kind of start to move a bit lower, so we'll have to see how that kind of plays out, you know interestingly yesterday along with kind of the move higher in oil prices, what we did see is China actually removed some export restrictions on some refined products like jet fuel and things.
Of that nature and diesel, right, so that might, you know, kind of help to dampen a little bit of, you know, the volatility on that side, you know, not just from kind of the the the crude side, but, you know, on the, on the refined product side of things, you know, which would be kind of helpful, you know, kind of more broadly.
Well, Michael, always great to have you on the show.
Thank you so much for weighing in on so many topics here and breaking it all down for us.
Thank you so much, Michael.
