Good morning,
 
Coming out of the weekend equity markets opened higher after a détente with Iran helped oil prices reverse some of the recent move higher. President Trump decided against an escalation with the hopes that a diplomatic resolution could be achieved though he has said that the window for that breakthrough is short. The other big story were the reports highlighting the continued investment by Nvidia to help finance the AI infrastructure buildout with reported potential commitments up to ~$1T since last Friday. This helped the tech complex rally at the open, but that strength was met with selling as the circular financing narrative quickly took hold. Also taking the wind out of the sales was a report from the Information just ahead of the open that China had begun domestically manufacturing DUV machines (deep ultraviolet lithography) which would be delivered to local chipmakers by the end of the year. ASML and other semi-equipment stocks sold off sharply. The S&P 500 gapped up to its 50d ma, but the index reversed about 100pts in the first hour of trade retesting Friday’s lows before stabilizing. The index ended the day unchanged, but the equal-weight version closed higher by 0.75% while other small and midcap indices also ended with modest gains. Communication services, consumer facing companies and financials led to the upside. Within tech software snapped back >3% after getting crushed last week. Time will tell whether this is just another short covering rally or if the sector is finally finding some interest after the recent results have not fit the prevailing doomsday narrative.
 
The tech wreck continued overnight with tech heavy indices in Asia selling off sharply. However, S&P futures have been improving throughout the morning trading slightly higher. Ahead of tomorrow’s Fed meeting it is a very busy day of earnings. Tech stocks remain under pressure in the pre-market since the close there have been multiple earnings updates. The numbers continue to point to very strong demand, but the stocks are largely getting hit given the very high expectations (GLW/AMKR/SANM). The results elsewhere also skew positively. Oil prices continue to move lower as President Trump suggests talks are ongoing and there are reports that Oman has presented Iran with a proposal for voluntary fees in the Strait. President Trump is meeting with Zelensky and Netanyahu at the White House this morning. S&P futures are slightly higher while Dow futures are up nearly 1% helped by strong earnings from Coca-Cola (+4%) and Sherwin Williams (+7%). J&J is also trading higher after announcing a talc settlement.
 

 
This morning’s ADP weekly job change fell to 15k from 16.5k last week. The trade deficit was about in line with estimates at just over $100B. Wholesale inventories came in a touch below estimates. After the open consumer confidence will be released. This afternoon there is a 7yr auction after yesterday’s 5yr tailed. The USD index continues to grind higher.
 

• US 2yr -2bps to 4.30%, 5yr -2bps to 4.38%, 10yr -2bps to 4.63%, 30yr -2bps to 5.12%
• USD index: -$0.01 to $101.38

 
Global markets were mixed overnight with tech heavy indices in Asia under significant pressure. South Korea’s Kospi ended the session down >10% triggering its 8^th market wide circuit breaker this year. Ahead of earnings this evening, the local SK Hynix shares were down ~15% (US ADR down ~4% in the pre-market). Regulators have pulled forward previously announced minimum deposit requirements for leveraged ETFs in an attempt to quell volatility. In Japan the Nikkei fell 4% with tech stocks getting sold aggressively (Kioxia -18%/Advantest -10%/Softbank -4%). Financials were also under pressure while consumer stocks outperformed. PM Takaichi is expected to unveil a consumption tax cut and an increase in the minimum wage later this week. The Yen continues to weaken ahead of the week’s BOJ policy meeting approaching 164¥/$. The China Shanghai Composite ended down ~1% but the Hang Seng was up 0.4%. Financials outperformed while local tech stocks also bucked the global trend after yesterday’s news. European indices have been trading on either side of unchanged throughout the session. Like the US it is busy on the earnings front. Staples are trading well after strong results from Unilever and helped by the defensive bid. LVMH numbers also helping the luxury sector. Mercedes is modestly higher after mixed results while Barclay’s is under pressure as it failed to meet high expectations after very strong results from its US peers.
 

 
Oil prices continue to extend to the downside with ICE Brent down ~2% but has bounced modestly after testing its 50d ma overnight (~$85). There are reports that OPEC+ will pause output increases after September. Natural gas prices are pulling back in both the US and Europe. Metals are under pressure. Ag is mixed. Crypto is also getting hit despite multiple major financial firms backing the Clarity Act.
 

 
Earnings:
After-Market: APLD, BLX, BRO, BRX, CDNS, CDP, CLS, ESI, FFIV, KFRC, KRC, LVMH, NE, NTB, NUE, PFG, RMBS, SSD, UDR, UHS, WELL
Pre-Market: AB, ABG, AMT, AXTA, BA, Barclays, CARR, CBU, CNC, DTE, ECL, GLW, GSK, HRI, DINO, HLT, HUBB, ITW, IVZ, IQV, JBLU, KO, Mercedes, OSK, PCAR, PYPL, PNR, PII, RCL, RITM, SPGI, SHW, TXT, TRU, Unilever, UPS, XYL
After-Market (Tues): AAT, AKR, APAM, ASH, ASM, AXS, BE, BRSP, BXP, CAR, CHE, CLW, CR, CSGP, CTO, ENPH, EXE, EXR, F, FCF, FE, GEF, HIW, KLAC, MIR, MDLZ, NBR, NOV, NXPI, OI, OMC, ORN, PDM, PPG, QUAD, RNST, ROG, SK Hynix, STAG, STX, TER, THG, TRTX, TTAM, UNM, V, VLTO, WM, WPC, ZWS
 
 
Economic Data:
US:

• ADP Employment weekly: 15k prior 16.5k
• Trade Balance: vs. -$100B cons., prior -$105.9B
• Wholesale inventories: 0.3% vs. 0.4% cons., prior 0.3%
• S&P Case Shiller: vs. 1.3%, prior 1.1%
• 10:00 Consumer Confidence
• 10:00 Richmond Fed Index
• 10:30 Dallas Services Index
• 1:00 7yr Auction
• 4:30 API Oil Inventories

Global:

• India Industrial Production: 7.3% y/y vs. 5.7% cons., prior 5%
• Spain Unemployment: 9.9% vs. 10.7% cons., prior 10.8%