Just when you think the markets have found their rhythm, another curveball comes flying in from the sidelines.
This time it wasn't a central banker or a full-blown geopolitical escalation, but a single press release out of Tehran that sent the oil price nearly 5 percent higher in one move. That alone was enough to nudge yields up and bring the Wall Street rally to a halt.
The Rundown
- A potential deal between Iran and Oman over the Strait of Hormuz sent the oil price soaring.
- The climb in yields forces investors to look at Friday's jobs report through a magnifying glass.
- Memory chip manufacturers were punished hard despite quarterly results above expectations.
- Big tech faces mounting legal headwinds around the protection of underage users.
Strait of Hormuz Pushes Yields Higher
The Dow Jones (DJI | ???0.85%) opened cheerfully in the green but closed with a loss of more than 0.8 percent. The Nasdaq (COMPX | ???0.06%) held up better and ended roughly flat.
The trigger for the reversal was a report from Iranian news agency Fars about a framework agreement between Iran and Oman regarding the management of the Strait of Hormuz. Under the proposal, American, Israeli, and other "hostile" vessels would be denied passage without paying compensation, and Iran would additionally manage a portion of the shipping traffic.
I suspect President Donald Trump won't need long to think about those terms. Unacceptable, to put it politely. But as long as no structural solution is on the table, the oil price will remain vulnerable to shocks. Brent shot nearly 5 percent higher to around $83 per barrel, and the U.S. ten-year yield climbed by more than 5 basis points to 4.67 percent, back near this year's high.
Jobs Report Becomes the Next Reference Point
More expensive oil obviously fuels the inflation debate all over again.
And that turns Friday's U.S. jobs report into a doubly sensitive moment. Economists are looking for 88,000 new jobs in July, following a weak print of 57,000 in June. A strong number stokes fears that the Federal Reserve will have to keep its foot on the brake longer. A weak number, on the other hand, opens the door to the scenario of a slowing economy.
Memory Chips Correct, Even Though the Numbers Were Fine
On an otherwise stable Nasdaq, the memory chip manufacturers took a serious beating.
WESTERN DIGITAL CORP (WDC | ???13.03%) lost 13 percent and SANDISK CORP (SNDK | ???6.81%) nearly 7 percent. Both companies actually beat expectations for the past quarter, but their guidance could no longer satisfy the sky-high expectations that had built up.
Anyone who pulls up the charts understands the reaction: WDC was up 153 percent year-to-date, and SanDisk had more than quintupled. Apparently at that point simply meeting the bar isn't enough, you have to obliterate it.
It's a useful reminder every time. Strong numbers are no guarantee of a rising stock price. The reaction depends entirely on the distance between what the market expects and what the company delivers. For stocks riding rallies like these, that bar gets dangerously high.
SpaceX Bounces Back Despite Lock-Up
SPACE EXPLORATION TECHN-CL A (SPCX | ???6.14%) rebounded 6 percent after Wednesday's heavy 14 percent drop. Remarkable, given that Thursday marked the end of the first lock-up period, freeing 911.5 million shares to trade.
That is roughly 43 percent more paper than the company floated at its IPO in June, worth about $100 billion in potential supply. The market had clearly already priced in the approaching lock-up expiry: the stock still trades one-fifth below the $135 IPO price.
Alphabet Opens the Wallet for AI
ALPHABET INC-CL A (GOOGL | ???1.29%) lost just over 1 percent after Bloomberg reported that the tech giant plans to raise up to $25 billion through new bond issues spread across ten tranches with maturities up to 40 years.
For the longest tranche the yield would sit roughly 1.55 percentage points above U.S. Treasuries. The money is intended for the company's massive AI investments. Alphabet has raised its capex guidance for this year to $205 billion and saw free cash flow turn negative in the first quarter for the first time since its 2004 IPO. That AI is capital-intensive is not new. That even Alphabet has to pry open its cash box for it, is a sign of the times.
Meta Gets Slapped on the Wrist in New Mexico
On the regulatory front, there was bad news for META PLATFORMS INC-CLASS A (META | ???0.19%). A court in New Mexico ordered the company to pay a $567 million fine and imposed a series of binding measures to better protect underage users.
Think of a 90-hour-per-month limit for users under 18, no notifications between 10 p.m. and 7 a.m., likes hidden by default, and a ban on romantic or sexual interactions with chatbots. Meta is appealing, but the pressure keeps piling up. In Europe a parallel investigation is running under the Digital Services Act, where the fine could reach roughly 10.4 billion euros.
U.S. media have already floated the comparison to a "tobacco moment" for big tech. For investors, that is a risk factor that can no longer be brushed aside from the long-term story of social platforms.
Conclusion
This trading session was a reminder that the rally of the past few weeks isn't going to grind higher in a straight line.
A single headline about Hormuz is enough to move the oil price, yields, and the sentiment barometer all at once. Add in the correction in memory chips, Alphabet's capital-raising trek, and the legal clouds hanging over Meta, and the picture is clear: the market remains receptive to negative surprises.
Friday's jobs report will point the way from here. Until then, I'd keep both hands on the buttons regarding position size.
ChartMill Market Desk - Kristoff
This daily update is prepared by ChartMill for informational purposes only and does not constitute investment advice. Always do your own due diligence before making investment decisions.
Read full article here »
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Oil Price Spoils the Party on Wall Street, Memory Chips Take a Hard Hit
Just when you think the markets have found their rhythm, another curveball comes flying in from the sidelines.
This time it wasn't a central banker or a full-blown geopolitical escalation, but a single press release out of Tehran that sent the oil price nearly 5 percent higher in one move. That alone was enough to nudge yields up and bring the Wall Street rally to a halt.
The Rundown
Strait of Hormuz Pushes Yields Higher
The Dow Jones (DJI | ???0.85%) opened cheerfully in the green but closed with a loss of more than 0.8 percent. The Nasdaq (COMPX | ???0.06%) held up better and ended roughly flat.
The trigger for the reversal was a report from Iranian news agency Fars about a framework agreement between Iran and Oman regarding the management of the Strait of Hormuz. Under the proposal, American, Israeli, and other "hostile" vessels would be denied passage without paying compensation, and Iran would additionally manage a portion of the shipping traffic.
I suspect President Donald Trump won't need long to think about those terms. Unacceptable, to put it politely. But as long as no structural solution is on the table, the oil price will remain vulnerable to shocks. Brent shot nearly 5 percent higher to around $83 per barrel, and the U.S. ten-year yield climbed by more than 5 basis points to 4.67 percent, back near this year's high.
Jobs Report Becomes the Next Reference Point
More expensive oil obviously fuels the inflation debate all over again.
And that turns Friday's U.S. jobs report into a doubly sensitive moment. Economists are looking for 88,000 new jobs in July, following a weak print of 57,000 in June. A strong number stokes fears that the Federal Reserve will have to keep its foot on the brake longer. A weak number, on the other hand, opens the door to the scenario of a slowing economy.
Memory Chips Correct, Even Though the Numbers Were Fine
On an otherwise stable Nasdaq, the memory chip manufacturers took a serious beating.
WESTERN DIGITAL CORP (WDC | ???13.03%) lost 13 percent and SANDISK CORP (SNDK | ???6.81%) nearly 7 percent. Both companies actually beat expectations for the past quarter, but their guidance could no longer satisfy the sky-high expectations that had built up.
Anyone who pulls up the charts understands the reaction: WDC was up 153 percent year-to-date, and SanDisk had more than quintupled. Apparently at that point simply meeting the bar isn't enough, you have to obliterate it.
It's a useful reminder every time. Strong numbers are no guarantee of a rising stock price. The reaction depends entirely on the distance between what the market expects and what the company delivers. For stocks riding rallies like these, that bar gets dangerously high.
SpaceX Bounces Back Despite Lock-Up
SPACE EXPLORATION TECHN-CL A (SPCX | ???6.14%) rebounded 6 percent after Wednesday's heavy 14 percent drop. Remarkable, given that Thursday marked the end of the first lock-up period, freeing 911.5 million shares to trade.
That is roughly 43 percent more paper than the company floated at its IPO in June, worth about $100 billion in potential supply. The market had clearly already priced in the approaching lock-up expiry: the stock still trades one-fifth below the $135 IPO price.
Alphabet Opens the Wallet for AI
ALPHABET INC-CL A (GOOGL | ???1.29%) lost just over 1 percent after Bloomberg reported that the tech giant plans to raise up to $25 billion through new bond issues spread across ten tranches with maturities up to 40 years.
For the longest tranche the yield would sit roughly 1.55 percentage points above U.S. Treasuries. The money is intended for the company's massive AI investments. Alphabet has raised its capex guidance for this year to $205 billion and saw free cash flow turn negative in the first quarter for the first time since its 2004 IPO. That AI is capital-intensive is not new. That even Alphabet has to pry open its cash box for it, is a sign of the times.
Meta Gets Slapped on the Wrist in New Mexico
On the regulatory front, there was bad news for META PLATFORMS INC-CLASS A (META | ???0.19%). A court in New Mexico ordered the company to pay a $567 million fine and imposed a series of binding measures to better protect underage users.
Think of a 90-hour-per-month limit for users under 18, no notifications between 10 p.m. and 7 a.m., likes hidden by default, and a ban on romantic or sexual interactions with chatbots. Meta is appealing, but the pressure keeps piling up. In Europe a parallel investigation is running under the Digital Services Act, where the fine could reach roughly 10.4 billion euros.
U.S. media have already floated the comparison to a "tobacco moment" for big tech. For investors, that is a risk factor that can no longer be brushed aside from the long-term story of social platforms.
Conclusion
This trading session was a reminder that the rally of the past few weeks isn't going to grind higher in a straight line.
A single headline about Hormuz is enough to move the oil price, yields, and the sentiment barometer all at once. Add in the correction in memory chips, Alphabet's capital-raising trek, and the legal clouds hanging over Meta, and the picture is clear: the market remains receptive to negative surprises.
Friday's jobs report will point the way from here. Until then, I'd keep both hands on the buttons regarding position size.
ChartMill Market Desk - Kristoff
This daily update is prepared by ChartMill for informational purposes only and does not constitute investment advice. Always do your own due diligence before making investment decisions.
Read full article here »