Good morning,
 
The S&P 500 fell 0.2% yesterday while the equal-weight (-1.2%), Russell 2000 (-0.9%) and Dow (-1.1%) saw larger declines. Oil jumped over 5% after the US resumed strikes against Iran and President Trump commenting the ceasefire was over as far as he was concerned. Despite the turn of events, it so far looks to be another contained flare up rather than complete collapse of the détente. Tech strength mitigated the losses for the S&P versus the other indexes. The US conducted more airstrikes on Iran overnight and Iran hit sites in Kuwait and Bahrain, but it seems that may be the end of the flare-up that pushed equities lower yesterday, at least for now.  S&P futures are near their best levels, up 0.3% as we approach the Open despite crude rising for the third straight day.
 

 
Software stocks are under pressure in the pre-market following a Bloomberg report that SBUX is using AI to develop internal tools to cut reliance on outside software, playing right into the AI disruption narrative. META is down 3% after a report it will begin production of a new AI chip in September and double it’s AI compute capacity to 14GW in 2027, following yesterday’s news it will invest ~$10B to build its first data center in Canada. That’s going against the concerns that were triggered last week on reports the company was looking into selling excess capacity. That’s also pushing AI tools and supply stocks (chips, etc) higher ahead of the Open. What’s also helping is Micron announcing its raising its planned US investment to over $250B through 2035, up from $200B. LEVI (-3%) reported a beat and raise last night but is trading lower. AZN is down 8% in the pre-market following negative clinical trial results.
 
Treasury yields are down 1-3bp despite modest strength in crude, pulling back after 2 days of gains. The FOMC minutes yesterday weren’t terribly interesting. There was broad support to change the statement language, and while the most near-term outlook tilted hawkish, commentary took a more dovish angle for the medium to longer term horizons. Weekly jobless claims were basically in line and on trend. The US Dollar Index is unchanged.
 

• US 2yr -3bps to 4.19%, 5yr -2bps to 4.30%, 10yr -1bps to 4.57%, 30yr +1bps to 5.08%
• USD index: +$0.01 to $100.77

 
Brent crude is modestly higher as we noted, gaining just under 1%. Precious metals are seeing a modest bounce while ag slips a bit. Bitcoin and Ether are modestly higher.
 

 
The Nikkei was up over 1% overnight, led by the major tech names while the rest of the market was broadly lower. Kioxia jumped 8% after Bloomberg reported Bain sold its remaining position (14%) in the stock. The firm had been winding down its position from 44% since the end of last year. The stake was acquired when a Bain-led group bought the business from Toshiba in 2018. An SPV that Bain set up for SK Hynix still holds a 14% stake in the company. China’s markets were mostly higher though Hong Kong fell. Memory chip maker CXMT will IPO next week with plans to raise ~$4B on Shanghai’s STAR market. China’s CPI and PPI were largely in line. European markets are mostly higher though the UK is down. Manufacturers, financials and tech are among the leaders.  German exports rose from the previous month and beat estimates.   
 

 
Economic Data:
US:

• Initial Claims: 215K vs 218K cons, prior 217K
  • Continuing claims: 1814K vs 1820K cons, prior 1814K
• 9:00am Fed Williams speech
• 10:00am Existing Home Sales
• 10:30am EIA Nat Gas Inventories
• 1:00pm 30y auction
• 1:30pm Fed Logan speech
• 4:30pm Fed Balance Sheet

Global:

• China CPI m.m / y.y: -0.3% / 1.0% vs 1.1% / -0.2% / 1.1% cons, prior -0.1% / 1.2%
• China PPI y.y: 4.1% vs 4.1% cons, prior 3.9%
• Germany Exports m.m: 0.9% vs -0.3% cons, prior 0.9%
• Mexico CPI: m.m: -0.3% vs -0.1% cons, prior -0.2%