Deadline Calling, the Bright Side, 4 in a Row, Anthropic's Deal, SpaceX IPO
As the clock ticks down toward Tuesday night, oil is retreating. Here's why. Plus, our latest look at the S&P chart and what it's telling us.
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Market_Recon_TSP1_KL
Tick, tick, tick, tick
Tick, tick, tick
Tick, tick, tick, tick
Tick, tick, tick
Sitting in the dark
Waiting for the start
The start of something new
Running into walls
Holding every breath
In spite of turning blue
- "Time Bomb" Rachel Bolan Southworth (Skid Row), 2022
Deadline Calling
President Donald J. Trump held a news conference on Monday, the day before his 8 p.m. ET deadline for the regime in Iran to reopen the Strait of Hormuz to maritime traffic. The president offered praise to U.S. special operators who conducted the daring rescue of the American aviators that had been shot down. Then, he got down to business. The president stated...
“The entire country can be taken down in one night and that night might be tomorrow night. They’re going to have no bridges. They’re going to have no power plants.”
President Trump added that this mission could likely be accomplished within a four-hour window. Iran has reportedly rejected a proposed 45-day ceasefire plan that had been proposed by the U.S. through Pakistani, Turkish and Egyptian mediators. What's left of the regime in Iran, which at this point, is obviously in no position to negotiate, came back with their own 10-point peace plan.
The U.S. quickly rejected the Iranian plan. Elsewhere, Secretary of Defense/War Pete Hegseth stated that Monday's strike would be the heaviest of the war and that Tuesday's planned strike would top Monday's.
The Bright Side
Readers may have noticed falling oil prices Tuesday morning. Yes, I'm up all night. At midnight on the East Coast of North America, front-month futures for WTI crude were trading with a $116 handle. Between 3 a.m. and 4 a.m. as I sat down for a cup of joe with my gal, the sweet stuff traded with a $115 handle. As I put the final touches on this morning note, I see West Texas crude trading in the low $112's. Why?
Well, think of it. Should the regime in Iran capitulate, the Strait of Hormuz will open for business and Iran will still be able to serve that nation's public with a basic level infrastructure provided utilities. Should the president be forced to take down these targets as a means towards bringing the Iranian regime to back off of firing munitions at commercial tanker ships and at the energy infrastructure of its neighboring nations, the Strait of Hormuz will open for business. The Iranian government just won't be able to serve its public.
Either way, that passage is going to open to civilian traffic. In normal times, about 20% of the world's crude oil is transported through that Strait every day. That's a lot of oil coming back online, which will subsequently ease global prices for gasoline and all crude-based fuels as well as natural gas. This will, without a doubt, boost economic activity, globally.
Marketplace
Monday was a solid day for U.S. equities. In fact, Monday was the fourth consecutive winning session for both the S&P 500 (+0.44%) and the Nasdaq Composite (+0.54%). Moving on to the mid-majors, the Dow Transports, and Philadelphia Semiconductors both added more than 1% for the session, while the KBW Banks came close.
Avis Budget (CAR) easily led the Transports, but all of the airlines and truckers performed well on hopes for lower fuel prices. The semis were led by memory/storage designers SanDisk (SNDK) and Micron (MU) .
Moving on to breadth, winners beat losers by a 7 to 4 margin at the NYSE and by roughly 5 to 3 at the Nasdaq. Advancing volume took close to a 74% share of composite NYSE-listed trade and an approximate 67% share of composite Nasdaq-listed activity. However, aggregate trading volume has been in constant day-over-day decline since March 31. This has extended our "pause" to three days after our Day One reversal of trend...
Note that for Wednesday, Thursday and Friday, the S&P 500 has hit insurmountable resistance at its 21-day exponential moving average (EMA), but has not sold off.
Eight of the 11 S&P sector SPDRs closed in the green on Monday, led by the Staples and Discretionary (all things consumer-focused) though none of these funds even gained 1% for the day. Materials (XLB) rode in the caboose for the session.
2 Newsworthy Items
Anthropic, which by the way, has quickly become my favored artificially intelligent assistant, has come to a deal with Alphabet (GOOGL) and Broadcom (AVGO) for multiple gigawatts of next-generation TPU capacity starting in 2027. Anthropic claims that demand for "Claude" has soared and that the firm's run-rate revenue has now exceeded $30 billion, up from just $9 billion three months ago.
SpaceX, on Monday night, provided details related to the firm's coming IPO. On June 7, SpaceX will hold a meeting with roughly 125 sell-side analysts from the 21 investment banks involved in taking the firm public. On June 11, the firm will then host up to 1,500 retail investors. Founder Elon Musk wants to make as much as 30% of this deal available to the retail public as opposed to the 5% to 10% that might be considered close to normal. Morgan Stanley (MS) , Goldman Sachs (GS) , JPMorgan Chase (JPM) , Bank of America (BAC) and Citigroup (C) will run the books for the deal.
Tell Us How You Really Feel
Analyst Ryan Brinkman of J.P. Morgan reiterated an outright "sell" rating on Tesla (TSLA) as well as his $145 price target.
Brinkman wrote... "We continue to see large -60% downside to our $145 December 2026 price target and advise investors to approach TSLA shares with a high degree of caution, mindful of execution risk and the time value of money within the context of the materially stronger distant out-year earnings expectations implied by the rise in TSLA share price that has occurred alongside a material collapse in consensus for all performance metrics through at least the end of the decade."
The bright side for Tesla investors? Ryan Brinkman is rated at 1 star out of 5 at TipRanks, is ranked #10,493 out of 12,128 Wall Street analysts TipRanks tracks, and has a 50% success rate over the past year with an average return of -1.60%. His two-year average return is -15.2%. Yikes.
Economics (All Times Eastern)
08:15 - ADP Employment Change (weekly): Last 10K.
08:30 - Durable Goods Orders (Feb): Expecting 0.1% m/m, Last 0.0% m/m.
08:30 - ex-Transportation (Feb): Expecting 0.6% m/m, Last 0.4% m/m.
08:30 - ex-Defense (Febr): Expecting 0.6% m/m, Last 0.4% m/m.
08:30 - Core Capital Goods (Feb): Expecting 0.4% m/m, Last 0.0% m/m.
08:55 - Redbook (Weekly): Last 6.9% y/y.
15:00 - Consumer Credit (Feb): Last $8.05B.
16:30 - API Oil Inventories (Weekly): Last +10.263BM.
The Fed (All Times Eastern)
08:45 - Speaker: Federal Reserve Vice Chair Philip Jefferson.
Today's Earnings Highlights (Consensus EPS Expectations)
After the Close: (LEVI) (.37)
Related: Four Green Days, Still No Conviction: What Traders Are (and Aren’t) Buying
At the time of publication, Guilfoyle had no positions in any securities mentioned.
