Good morning and Happy Friday,
 
Yesterday, Tech weakness brought the S&P 500 down 0.5%. However the equal-weight rose 1% as breath was solid and 8/11 sectors were higher. The tech weakness was sharply focused on semis (NYSE Semis Index -5%) and memory names (DRAM -9%). Late in the day news that Alphabet was delaying the latest version of its Gemini AI model sent shares, which were trading around unchanged, sharply lower, finishing down -4%. On top of that, Chinese startup Moonshot announced the launch of its Kimi K3 AI model on social media just after the Google news. It’s supposedly the world’s largest open-weight AI model, with performance comparable to higher performance US models. DeepSeek 2.0 feelings have been triggered. Earlier, earnings from TSMC were robust, but additional capacity increases and margin pressure fed the Bearish AI narrative. Treasury yields were unchanged on the 2y and slipped ~3bp on the longer tenors as crude fell about 1%.
 
Tech is once again week this morning and it’s an options expiration day. The DRAM ETF is down another 4% in the pre-market. The hyperscalers are down around 2% as is the IGV software ETF. Like yesterday though, most of the sector ETFs are trading flat to higher in the pre-market, led by Energy, Utilities and Staples. The US continued to strike military targets in Iran as the re-escalation continues, keeping crude bid. S&P futures are down around 1% as are Russell futures. The Dow is lower but outperforming. Netflix is down 10% after reporting last night, as is Intuitive Surgical. The set of financials including TRV, TFC, and FITB are around flat.
 

 
After finishing at their lows yesterday Treasury yields are flat at 2ys while down 2bp at the longer end. The US Dollar Index is slightly higher. Housing Starts beat estimates, rising to 1.427M from last month’s 1.199M. Building Permits came in a little light. Import Prices were higher than expected but came in from last month.  
 

• US 2yr -0bps to 4.14%, 5yr -2bps to 4.25%, 10yr -2bps to 4.54%, 30yr -2bps to 5.07%
• USD index: +$0.10 to $100.67

The Nikkei dropped 4%. Kioxia hit a limit-down (-16%), putting its weekly loss at over 30%. Japan is closed Monday. South Korea was unchanged only because it was closed for a holiday. In China Hong Kong outperformed Shanghai but snapped a 5-day winning streak as all major indexes were sharply lower. For the week Hong Kong gained 1.6% while Shanghai lost 5.8%. Chinese startup Moonshot launched Kimi K3, the world’s largest open-weight AI model, which severely impacted other Chinese model makers like Z.AI (-30%) and MiniMax (-16%). Memory chip maker CXMT IPO’d, selling, raising ~$10B at an $85B valuation. Shares will not start trading until July 27, however. In a speech last night President Xi positioned China as the leader in a new global AI order, led by China’s low-cost AI models. The government also took issue with President Trump claims in his speech last night that China interfered in the 2020 US election. European indices are faring a bit better due to their smaller tech weighting but are still broadly lower. Utilities, Energy and Telecom are leading. For the week the indices were mixed but outperformed most global peers. Final EU CPI was unchanged from the initial reading. Andy Burnham has been confirmed as the leader of the UK’s Labour Party, as he takes the next step to becoming the UK’s next Prime Minister. The German government is moving forward on talks with Unicredit regarding a Commerzbank acquisition.
 

 
Brent crude is up 2%, continuing to test the 50/100d ma ~$86. Precious metals are lower. Gold is flat, resuming its test of $4000 but silver, platinum and palladium are all lower. Crypto is lower as well with Bitcoin and ETH down about 2%. Ag is modestly higher.
 

 
Earnings:
After-Market: AA, CNS, FNB, ISRG, NFLX
Pre-Market: ALV, FITB, RF, TRV, TFC

Economic Data:
US:

• Housing Starts: 1.427M vs 1.31M cons, prior 1.199M
• Building Permits: 1.367M vs 1.40M cons, prior 1.41M
• Import / Export Prices m.m: 0.3% / -0.6% vs -0.7% / -0.4% cons, prior 1.7% / 1.2%
• 9:15am Industrial Production
• 10:00 am Univ Mich sentiment
• 1:00 pm Rig Count

Global:

• None