Good morning,
 
Mega caps were notably weak yesterday, pulling the S&P 500 down overall (-0.4%) and creating underperformance versus the equal-weight (+0.2%) and small caps (R2K +0.8%). Reports of progress in nuclear talks between Iran and the US helped stocks early on, continuing to pressure crude (down ~3%). Yields saw no benefit from that however and rose ~5bp across the curve.  Hyperscalers were the main target of weakness: ORCL, GOOG, AMZN -5%; MSFT, META -2-3%.  On the other hand, the DRAM memory ETF continued to climb to new heights. Real Estate, Energy (despite oil’s decline) and Healthcare were the leading sectors.
 
A night’s sleep didn’t help matters. Asian equites were under significant pressure overnight, especially the high-flying chip/memory names. That has bled into European markets and US futures, which opened about flat but steadily declined overnight.  Tech, Industrials and Consumer Discretionary sector ETFs are leading to the downside in the premarket. Staples and Healthcare are leading. President Trump signed an executive order on quantum computing innovation and the group is trading higher before the Open. Newly public AI chip maker Cerebras reports tonight, in what has become a more interesting update given the recent moves, as well as global economy bellwether FedEx. Micron reports after the close tomorrow.  Carnival reports this morning and flash PMIs are due after the open.
 

 
Treasuries have a bid this morning and yields are erasing some of yesterday’s increase. The 2y is down 4bp, 10y 2bp.  The US Dollar Index has breached 101 for the first time since last May.

• US 2yr -4bps to 4.20%, 5yr -3bps to 4.26%, 10yr -2bps to 4.49%, 30yr -1bps to 4.95%
• USD index: +$0.27 to $101.06

It was ugly in Asia. The Nikkei dropped 3.5% overnight. Memory maker Kioxia fell 15%. The Yen was relatively stable following a testing of 162 the day before. Finance Minister Katayama confirmed a phone call with Treasury Secretary Bessent but didn’t say there was any intervention. Both Manufacturing and Service PMIs improved from last month. The Japanese government is targeting stocks, investment trusts and bonds to make up 40% of household assets by 2040, compared to 23% currently, according to a story in the Nikkei. Meanwhile, Sony is said to be planning its first dollar bond offering in almost 30 years- the latest major company to tap US capital markets. Chinese markets were lower as well. The Hang Seng Tech index has fallen below April 7, 2025 levels- the middle of the Liberation Day sell-off. Unlike prior tech weakness, AI-heavy stocks came under pressure as well last night. South Korea’s KOSPI plummeted 10% and triggered a market circuit breaker. European equities are faring better than Asian counterparts but are still seeing losses of around 1%. PMIs across the region were mixed but Services improved while Manufacturing was more or less steady.
 

 
Crude and nat gas are down less than 1%, off their lows with Brent hovering above its 200d ma. Metals are lower, especially silver which is falling back towards YTD lows ~$61.25. Bitcoin and ETH are under pressure as well, reversing yesterday’s gains.
 

 
 
Earnings:

• Pre-Market: CCL, KFY, SUNB
• After-Market: CBRS, FDX, ICR, KBH, WOR

Economic Data:
US:

• ADP Weekly Employment change: 30.75K vs prior 26.5K
• 9:45am Manufacturing Flash PMIs
• 9:45am Services Flash PMIs
• 10:00am Richmond Fed Manufacturing Index
• 1:00pm 2y auction
• 1:00pm Money Supply
• 4:30pm API Crude Inventories

 
 
Global:

• Flash PMIs:
  • Japan Manufacturing: 54.9 vs 54.5 cons, prior 54.5
  • Japan Services: 51.8 vs prior 50.0
  • India Manufacturing: 54.5 vs prior 55.0
  • India Services: 57.3 vs prior 59.8
  • France Manufacturing: 50.7 vs 50.0 cons, prior 49.7
  • France Services: 47.4 vs 45.5 cons, prior 44.3
  • Germany Manufacturing: 50.0 vs 50.5 cons, prior 50.1
  • Germany Services: 46.8 vs 49.0 cons, prior 48.1
  • UK Manufacturing: 53.1 vs 53.8 cons, prior 53.9 
  • UK Services: 48.7 vs 50.5 cons, prior 49.3
  • EU Manufacturing: 51.3 vs 51.6 cons, prior 51.6
  • EU Services: 48.9 vs 48.5 cons, prior 47.7