U.S. Futures & World Markets

US equity futures are lower this morning, with tech stocks leading the weakness. Taiwan Semi's report wasn't enough to keep investors happy — higher capex spending in a cyclical name is causing the nervousness. Normally, companies spending aggressively is a sign of confidence, but in a cyclical industry like semiconductors, Wall Street is worried the spending may be getting ahead of demand.

TSM didn't help South Korea's market, with the Kospi Index down 7%. Korea's Financial Services Commission also increased the leveraged ETF trading minimum deposit requirement — 30 million won ($20,300) — and temporarily halted the listing of new leveraged ETFs.

Fresh US strikes aren't helping the mood, although oil has barely moved on the news. Bears are pointing to the stalemate and the impossibility of securing the Strait of Hormuz as reasons stocks may move lower. Bulls remain hopeful of some type of negotiated settlement.

We'll see if the market can maintain its composure as investors rotate out of semiconductor stocks. Mega-cap tech held up well yesterday and helped cushion some of the weakness. Investors will get another chance to reassess as more non-financial earnings hit the tape this morning. On that front, it's encouraging to see UnitedHealthcare up 7% in premarket after its results.

S&P Futures vs. Fair Value: -27.00  |  10-Year Yield: 4.57%

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Charts & Data

The S&P really hasn't done much over the last two months. A useful reality check — headline index flat while enormous sector rotations churn beneath the surface.

Only the 4th time this bull market the S&P has sat within 5% of its ATH without a new high. Excluding 2024, every prior case saw a real pullback. @bluekurtic via Daily Chartbook: "Bears are smiling." A cautionary near-term technical signal.

Sentiment is still risk-on, but the market is far from euphoric — leaving room for more upside into earnings season. Goldman Sachs via Daily Chartbook: "Volatility has cooled over the past month." The setup isn't crowded enough to worry about a sentiment reversal.

Global fund manager cash fell to 3.6% — among the lowest levels on record. BofA Fund Manager Survey via Daily Chartbook: professional investors are running lean on dry powder. When everyone is in, the incremental buyer is the market's biggest vulnerability.

Risk appetite remains muted — concerns focus on valuations, geopolitics, and monetary policy. S&P Global via Daily Chartbook: "Investors worry about near-term returns." A backdrop of cautious professional sentiment even as retail remains enthusiastic.

Appetite for tech now the lowest since March; healthcare has jumped to the top of investor preferences; industrials edged up to second position. S&P Global Investment Manager Index via Daily Chartbook: the sector rotation is showing up clearly in the survey data.

Investors haven't been this under-exposed to consumer stocks in over 20 years. BofA Fund Manager Survey via Daily Chartbook: the most unloved sector by a wide margin — a potential contra-indicator if consumer data continues to hold up.

Money is still flooding into tech, industrials and real estate — investors chasing AI infrastructure demand. JPMorgan via Daily Chartbook: even as semiconductor names wobble, the structural flows toward AI-adjacent infrastructure remain intact.

Semi-related ETFs averaging about $40B traded per day over the last month — 10x the daily volume when ChatGPT was released three-and-a-half years ago. Todd Sohn, Strategas via Daily Chartbook: the scale of retail and institutional interest in semiconductor exposure is without precedent.

The gap between semiconductors and technology excluding semiconductors has been steadily widening. MRB Partners via Daily Chartbook: the divergence within tech is the defining investment story of this cycle.

The hyperscaler multiple has been crushed because the market doesn't believe these companies can create enough ROI — but investors may be in for a surprise. @elclutch via Daily Chartbook: the bull case for Mag 7 remains intact if the AI revenue ramp accelerates.

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