U.S. Futures & World Markets
Stocks are trying to bounce this morning after Friday's stock rout. An escalation of attacks in the Middle East had investors on edge over the weekend, but headlines this morning have cooled the tension — at least for now.
As for Friday's action, it was a selloff of epic proportions. The Nasdaq was down 5%, and the semiconductor index (SOX) was down 10% in a single day. It's really hard for an entire index to drop ten percent in one day — but that's exactly what happened. It's a reminder that momentum is a wild thing, and when it reverses, it can happen fast.
The big question now is whether this is just a pullback in the AI trade, or if we've seen the final parabolic move higher and are now entering a new reality. Once stocks go vertical, they become more susceptible to any level of doubt. When investors start questioning the story, they sell first and ask questions later.
Academy Securities had some good thoughts on equity issuance and buybacks worth highlighting:
"Stories hit the tape that Meta was potentially considering raising 'tens of billions' in a stock offering after Google's record $85 billion share deal. Is the market going to have to digest a lot more equity issuance than previously thought? Is the share buyback era shifting? Share buybacks have been a tailwind for markets, and a reversal of that could weigh on markets. The issuance seems to make a lot of sense — tapping as many pools of capital as possible to work on the AI and Data Center buildout — but it should weigh on markets as it is yet more dollars to absorb."
Academy SecuritiesCORE Headlines
- Iran state media says Iran's armed forces will end military operations against Israel. — CNBC
- Israel executed strikes on military targets in Iran after President Trump asked Netanyahu not to retaliate. The strikes followed an Iranian missile attack on Israel. — Bloomberg
- American forces have witnessed 1,000 commercial vessel transits through the Strait of Hormuz since the ceasefire. Ships are turning off transponders to avoid detection from Iran. — Bloomberg
- President Trump says he doesn't want a big influence on Fed Chair Kevin Warsh. Says there is "no reason" to raise rates and rates should be lowered. — NBC
- Karen Bass and Nithya Raman advance to a runoff for Los Angeles mayor. Spencer Pratt eliminated. — Bloomberg
- Mastercard and Visa suspending transactions in Cuba for non-US foreign visitors. — WSJ
- Some employers are dropping coverage for weight loss drugs. — WSJ
- OpenAI planning a large overhaul of ChatGPT. — FT
- Monterey Park, CA becomes the first town where residents voted to ban data centers. — WaPo
- United CEO Scott Kirby says a large airline merger is unlikely. — Reuters
- Nvidia CEO Jensen Huang says the selloff in technology is a good buying opportunity. — Bloomberg
- GE Aerospace optimistic about new engine orders from China. — Bloomberg
Charts & Data
AI momentum has powered the S&P to new all-time highs — earnings are the foundation. Goldman Sachs: the rally has been built on real earnings growth, not multiple expansion. That remains the central bull case heading into a period of potential turbulence.
Earnings estimates keep moving higher. Goldman Sachs via Daily Chartbook: the direction of estimate revisions — still up — is the most bullish data point in the market right now, even after the selloff.
US equities in line with recent history on valuations — rest of world looks cheap. Callum Thomas: "US equities are in line with recent history average but not cheap/below average. Whereas the rest of the world does look cheap vs its own history and vs USA." International diversification is starting to look more compelling from a valuation standpoint.
Speculative futures positioning plunged to net-short — a contrarian bullish signal. Callum Thomas: "An important piece of the puzzle was speculative futures positioning plunging into net-short territory. This is an important indicator from a contrarian standpoint — speculators tend to be crowded to the short side near the bottom. But crowded short positioning also represents future potential buying, especially if the market begins to rebound."
Margin debt dropped sharply — BofA analysis calls it a contrarian bullish signal. Callum Thomas: "Large drops in margin debt indicate panic and ultimately lead to a selling climax as margin calls get triggered and capitulation sets in. Once all the sellers have sold, selling pressure exhausts and the bottoming process can run its course. BofA analysis suggests the shift in margin debt rate of change is a contrarian bullish signal."
Job growth re-accelerated in a striking reversal — 188K 3-month average vs. -39K in December. Daily Chartbook: "The re-acceleration in job growth this year is striking and honestly surprising." A strong labor market backdrop complicates the Fed's path to rate cuts.
Global container shipping rates surged 23% in a week to $3,433 per 40-foot container. @lizannsonders via Daily Chartbook: Drewry's World Container Index shows a sharp spike that could foreshadow renewed goods inflation in the months ahead.
Market now pricing a 69% chance of a rate hike in 2026. Bloomberg via Daily Chartbook: "Fed pricing has now flipped from cuts to hikes in 2026." The implications for equity valuations — especially for growth stocks — are significant if the market is right.
If Hormuz stays closed past June, oil could rise $5/month in Q3 and $15/month in Q4. JPMorgan via Daily Chartbook: "Each additional month of disruption would lift average prices by roughly $5 in 3Q26 and $15 in 4Q26, driven primarily by accelerating inventory depletion." The stakes for a peace deal keep rising.
A record two-thirds of institutional investors expect oil prices to fall — the most bearish oil reading in the survey's 10-year history. Goldman Sachs via Daily Chartbook: an extraordinary consensus view against oil. Contrarians take note.
Surge in single-stock call option volumes — "if chasing upside using gearing is investing." Simon White, Bloomberg via Daily Chartbook: "There has been a surge in volumes of call options, especially in single-stocks, as traders and investors get exposure to the AI-adjacent stocks driving the rally." A classic late-cycle speculative signal.
Tech vertical while Staples and Financials lag — only one prior analog: Q1 2000. @jeffweniger via Daily Chartbook: "Only once before have we seen Tech go vertical while Staples and Financials refused to tag along. That was the 12-month window through Q1/2000." The parallel is uncomfortable.
NDX gapped down 1%+ on two consecutive days — historically bullish 2 months later. @bluekurtic via Daily Chartbook: "This is extremely rare price action in the Nasdaq 100 — only the 16th such case ever. Two months later, the index was higher in 13 of 15 cases, with a median gain of 8.6%." History tilts toward recovery from here.
Interesting Reads
- One view on where Somalia stands right now — Wardheernews
- Airline profits set to halve this year as fuel costs jump by $100 billion — CNBC
- How long does it take to plan a bridge? — Construction Physics. I'd like someone to write an article on why it takes 25 years to redo a section of I-95 in Philly.
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