A Chip Rip
Oil investors brace for a prolonged war as the U.S. and Iran continue to flex their muscles while holding up any talks.
Key Takeaways
Dip-Buying Reflex Still Strong: The big news yesterday wasn’t that the equity market closed lower amid ongoing headline news coming out of the Iran war (or the ceasefire that doesn’t look like one), but rather that the major averages bounced back. At one point, for example, the Dow was off -1.3%, and then the bargain hunters came in and trimmed the loss to -0.4% as the closing bell rang. The same was true for the S&P 500, which swung from -1.0% down mid-day to -0.4% at the close.
Chip Momentum Running Hot: What isn’t changing is the epic run in the semiconductor space, which is riding an unprecedented sixteen-day winning streak and is up a ripping +38.7% over that time span. The terrific Intel results have given a +0.6% push to Nasdaq futures in the pre-open trade — chipmakers are the clear standout performers, yet again — but the S&P 500 is still on track for its first weekly decline since March, even as the Nasdaq 100 is on pace for its fourth straight weekly gain.
Earnings Glow but Risks Priced Out Too Fast: An estimated 80% of U.S. companies have topped their EPS targets so far in the Q1 reporting period. It may have been too early for the war to show up in the U.S. earnings reports, which have retained their glow. After all, two-thirds of the quarter took hold before the conflict began. While the stock market rejoiced over the recent end to the bombing campaign, pricing out the end of the war seems to have been a bit hasty. And here we are today, with the average price of a gallon of diesel now +45% higher than it was pre-war, and a gallon of regular gasoline up +35%. I recommend a read of Energy traders dig in for long Middle East conflict on page 10 of today’s Financial Times.
