Pakistani Path to Peace? Meet Amazon's Sprout Bot, CPI Hike

Market_Recon_TSP1_KL

"Peace is not the absence of conflict, it is the ability to handle conflict by peaceful means."

- U.S. President Ronald W. Reagan, 1982

Give Peace a Chance?

There were rumors throughout the day on Tuesday. Financial markets, in the aggregate, seemed skeptical. Overnight, that has changed. Significantly. As the zero-dark hours pass and late-night Tuesday melts into very early Wednesday morning, I see that front month futures prices for Crude oil are trading more than 5% lower. I see that Asian equities traded higher and European equities are opening higher as well. I see that buyers have returned to U.S. Treasury markets. Lastly, I see that equity index futures in the U.S. are trading higher as well.

The rumors of negotiations began in earnest very early on Monday morning as Pres. Donald Trump posted to social media that U.S. officials were talking to Iranian officials and that the U.S. would refrain from targeting Iran's energy infrastructure for five days while there was a possibility that peace might break out. Iran's central command has stated repeatedly that it is not engaged in any talks with its adversaries.

That said, it is quite obvious that representatives from the U.S., as well as leaders from Pakistan, Turkey and Egypt are all discussing peace with someone in Iran that thinks that they do have that kind of authority. Or maybe there is no single leader left in Iran, after the military beating that nation has taken that would have had that kind of authority prior to this now one-month old war.

Tuesday Afternoon

Late Tuesday, even as the U.S. deployed more amphibious infantry and then airborne infantry as well to the Middle East, the New York Times reported that the U.S. had sent a 15-point plan to Iranian leadership that could bring hostilities to an end. We now know that this offer of a peaceful settlement was delivered via Pakistani leadership. Axios reported additionally, that U.S. representatives and a group of mediators from the region were waiting for a response from Tehran in hopes that high-level talks could take place this week, potentially as soon as Thursday. There has been no word on whether or not Israel is participating in the peace process.

Though not a direct response, Iran launched more strikes at neighboring countries overnight to include both Saudi Arabia and Kuwait, while Iran and Israel continued to exchange missile fire. Despite these facts and despite an Iranian letter that appears to grant permission to vessels of "non-hostile" nations to traverse the Strait of Hormuz, financial markets have exhibited a belief overnight that there is a process underway.

Wednesday Morning

The Associated Press is reporting that whoever thinks they are in charge in Iran has indeed received the 15-point peace proposal drafted by the U.S. that would close the war. Without getting granular, AP reported that these points include at least a rollback of Iran's nuclear program, monitoring by the International Atomic Energy Agency, limits on missiles, and co-control over the Strait of Hormuz among other unidentified points. There would be some kind of relief from existing sanctions for Iran.

The Iranian military publicly rejected the U.S. proposal on Wednesday morning. It is unknown if this is an attempt to simply save face or even if the military is in charge of anything in Iran. What is known is that Iran's armed forces still have retained limited offensive capacity, and that the nation now has little ability to defend itself.

See Me, Feel Me

See Me

Feel Me

Touch Me

Heal Me

Right behind you, I see the millions

On you, I see the glory

From you, I get opinion

From you, I get the story

- Peter Townshend (The Who), 1969

Marketplace

On Tuesday after a strong day for U.S. markets on Monday, the Nasdaq Composite surrendered 0.84% as the S&P 500 gave up 0.37%. Though the broader indexes showed some skepticism, the day was hardly a beat-down session. The Dow Transports gained 1.34% led by Avis Budget (CAR) , the Philly Semiconductors gained 1.28% led by ON Semiconductor (ON) , and the Dow Jones U.S. Banks added 1.17%, led by Citigroup (C) . All of the small- to mid-cap indexes closed in the green as well.

What about breadth, you ask? Bad, but not awful. Losers beat winners by just a smidgen at the NYSE, but by a three-to-two margin at the Nasdaq. Six of the 11 S&P sector SPDR ETFs closed out the day in the win column, led by Energy (XLE) and the Materials (XLB) . Communication Services (XLC) led the losers as cyclicals clearly outperformed both growth and defensives for the regular session.

Advancing volume took a surprisingly impressive 54.4% share of composite NYSE-listed trade, but just a 38.7% share of composite Nasdaq-listed activity. Perhaps most importantly, for the bulls, on a day-over-day basis, aggregate trade contracted by 4.6% across Nasdaq-listings and by 12.3% across NYSE-listings, rendering the day's price discovery less important technically, than it might have otherwise been.

The Chart

Readers will see that if Monday was indeed a "day one" bullish reversal of trend as we debated in this column 24-hours ago, that Tuesday presents as what would be a quite necessary pause on lower trading volume.

Should Wednesday result in a convincing "up" day for the major U.S. equity indexes on increased trading volume (barring a catastrophic news event), we will have a technical confirmation of that change in trend meaning that at least a short-term bottom may have very likely been put in on Friday.

Tech News

- At its Arm Everywhere event in San Francisco, Arm Holdings (ARM) revealed the new Arm AGI CPU, which is a custom-designed central processing unit aimed at supporting agentic AI workloads. This chip can supposedly deliver twice the performance of the traditional x86 platforms sold by both Intel (INTC) and Advanced Micro Devices (AMD) . The chip was developed in concert with Meta Platforms (META) , will be deployed by OpenAI among other key AI firms and will be manufactured by Taiwan Semiconductor (TSM) .

- SK Hynix (of South Korea) will spend a rough $8B on advanced equipment from ASML Holding (ASML) in an attempt to meet surging demand for memory chips and capacity. The company is also looking to raise as much as $10 billion from a potential co-listing at a U.S. exchange. Micron Technologies (MU) traded lower on the news.

- Amazon (AMZN) , according to Bloomberg News, is acquiring start-up Fauna Robotics, Fauna is the developer of a human-like, 42-inch tall, humanoid robot known as "Sprout." Sprout is able to interact with humans, can walk, dance, open doors and will respond to its name. Sprout is conversational and will develop social behaviors and will form memories. The robot is powered by Nvidia's (NVDA) Jetson Orin platform and is expected to retail at $50,000. Amazon will market Sprout to consumers for household use.

Inflation

As gasoline prices have soared over the past month, the Cleveland Fed's real-time model for national consumer price index for March is now up to 3.16% on a year-over-year basis, which would be up from 2.4% for February. Cleveland sees core CPI (ex-energy & food prices) at growth of 2.6%, which would be up from 2.5%.

Very interestingly, Hedgeye, a macro-service I subscribe to and trust very much as I no longer have a staff to rely upon, in its weekly update, took the projection for headline March CPI all the way up to growth of 3.25% from 3.08% a week ago.

I don't like to give away someone else's store, especially one I value and pay for, but given Hedgeye's consistent accuracy, the fact that it is now a day-old and the size of this update, I thought it newsworthy. To my Canadian hockey-playing, economics and financial markets colleague, Keith McCullough, who runs that shop, you deserve more recognition than you get. Hope this helps.

Economics

(All Times Eastern)

07:00 - MBA 30 Year Mortgage Rate (Weekly): Last 6.3%.

07:00 - MBA Mortgage Applications (Weekly): Last -10.9% w/w.

08:30 - Export Prices (Feb): Expecting 0.5% m/m, Last 0.6% m/m.

08:30 - Import Prices (Feb): Expecting 0.2% m/m, Last 0.2% m/m.

10:30 - Oil Inventories (Weekly): Last +6.156M.

10:30 - Gasoline Stocks (Weekly): Last -5.436M.

The Fed

(All Times Eastern)

4:10 p.m. - Speaker: Reserve Board Gov. Stephen Miran.

Today's Earnings Highlights

(Consensus EPS Expectations)

Before the Open: (CHWY) (.28), (CTAS) (1.24), PAYX (1.67)

After the Close: JBS (2.24), (JEF) (.84)

At the time of publication, Guilfoyle had no position in any security mentioned.