Truce Talk Trouble, Semis Surge, Transports Tumble

Should I Stay or Should I Go

Should I stay, or should I go now?
Should I stay, or should I go now?
If I go, there will be trouble
And if I stay, it will be double
So come on and let me know

- Strummer, Jones (The Clash), 1982

Marking Time

What is the purpose of marking time? To get one's cover and alignment was always the right answer when I was a young buck. The apparently futile exercise of marching in place does serve a purpose. It keeps the entire unit in step, while on parade or in transit by foot, while every member of the group makes sure that they are 40 inches behind the noggin to their front and four inches from the shoulders to their left and right. This is what the U.S. Navy specifically, and the U.S. military more broadly, is doing at the moment. They are making sure that while there is a pause in offensive (and defensive) operations, that all of the moving parts are positioned correctly for whatever comes next.

Double blockade? That's where the situation is right now at the Strait of Hormuz. The U.S. Navy is blocking entry to the Gulf of Oman for ocean-going vessels that have made stops in Iran, are under sanction by the U.S. or international authorities, or are flagged as Iranian-owned. That's not all. Reuters is reporting that on Wednesday, the U.S. Navy intercepted at least three Iranian-owned ships not too far away, in the waters off of India, Malaysia and Sri Lanka.

This came in response to the Iranian Islamic Revolutionary Guard having fired upon three merchant vessels in the Strait of Hormuz. Two of those ships were escorted into Iranian waters while the third was apparently left disabled. The hostility came just hours after the U.S. had extended at least its side of the ongoing ceasefire. Tell us how you really feel. There had been continued hopes on the part of the Trump administration that peace talks would resume by this Friday.

Those hopes, while not dashed just yet, are starting to look more and more far-fetched. Leadership in Iran has become quite fractured as a result of the war having taken out multiple layers of government. There seems to be a civilian-led arm of leadership that is trying, perhaps earnestly, to reach a deal with the U.S. Then there are the hardliners and the hardliners happen to be the guys with the guns. Those are the guys who may never surrender no matter how badly beaten they have been. They are also the guys who want to continue to pose a nuclear threat to not just the entire region, but the planet.

Quote of the Day, Part I

"If you're alive, there's a purpose for your life."

- Rick Warren

Markets

On Wednesday, financial markets, led by keyword reading algorithms, latched onto the extension of the truce by the U.S. Overnight, these same algorithms are reacting negatively to the hostility that the Revolutionary Guard continues to impose on civilian craft that they are able to reach and by extension, upon their own economy and citizenry.

For the session, the S&P 500 won back 1.05%, closing above the highs of either Monday or Tuesday. The Nasdaq Composite gained 1.04%. This also took out the highs of the two "down" days that the markets had experienced this week. Does that matter? Yes, it does. We'll explain. The rally was led by growth stocks.

The Philadelphia Semiconductor Index gained 2.72%, posting an incredible 16th consecutive green-candle day. That's a record, by the way, since this index was created in late 1993. Arm Holdings (ARM) and Micron Technology (MU) were the runaway winners. The Dow Jones US Software Index rallied for 2.33% on Wednesday, led by CoreWeave (CRWV) .

Interestingly, the Dow Transports gave up 8.4% for the day. The group was pressured, of course, by oil prices, which were up sharply for obvious reasons, but also by Avis Budget (CAR) . The auto rental company finally saw its short-squeeze come to an end and collapsed. That stock gave up 37.8% for the day and is down another 6% overnight.

Breadth

Six of the 11 S&P sector SPDR ETFs ended the Wednesday session in the green, easily led by Tech (XLK) , and followed by Energy (XLE) . The REITs (XLRE) rode out the day in the caboose. Again, growth outperformed both cyclicals and defensives. Defensives and cyclicals were mixed where growth was omitted.

Winners beat losers by a five-to-four margin at the NYSE and by a more impressive seven-to-four at the Nasdaq. Advancing volume took a comfortable 66% share of composite Nasdaq-listed trade and got by with a 53.4% share of NYSE-listed activity. Trading volume ebbed quite badly though. Aggregate trade across Nasdaq-listings contracted by 13.2% on a day over day basis, and by 4.7% across NYSE-listings. Trade cooled off across the membership of the S&P 500 as well.

This all makes Wednesday something of a non-event. No, Wednesday does not count as a "pause" day after the "Day One" bearish reversal of trend on Tuesday because the highs of the week were taken out. Yet, the positivity of the Wednesday session must be taken with a grain of salt due to the lack of conviction or trading volume. This sets up Thursday for some potentially meaningful activity. At zero-dark thirty on Thursday morning, that concept is not looking so hot.

When?

According to Reuters, Taiwan Semiconductor (TSM) has announced plans to open an advanced chip facility in Arizona by 2029. This would expand on the company's existing U.S. operations and ultimately reduce the need to ship chips made here back to Taiwan for packaging. Co-COO Kevin Zhang commented, “We are going to build a CoWoS capability and 3D-IC capability there before 2029, so that is still our goal." These are two of Taiwan Semi's advanced packaging technologies, which are critical for delivery of the high-performance and AI-capable chips used or designed by clients that include both Nvidia (NVDA) and Apple (AAPL) .

In Other News....

SpaceX may be planning to manufacture its own GPU in response to the global shortage of graphics processing units. This would expand upon the ongoing efforts across Elon Musk's companies to include xAI and Tesla (TSLA) to manufacture a "Terafab" chip in Austin, Texas. Musk has told the media that his companies will adopt Intel's (INTC) 14A process to help with his efforts to keep up in the AI race and combat the global shortage of memory chips. Yes, demand for both GPUs and storage / memory is still easily outstripping supply. Intel is trading higher on this news and will report its quarterly financial results tonight.

Quote of the Day, Part II

"You drift through life and let things happen to you, or go by design and say, 'This is what I'm intended to do.' "

- Rick Warren

Economics

(All Times Eastern)

08:30 - Initial Jobless Claims (Weekly): Expecting 211K, Last 207K.

08:30 - Continuing Claims (Weekly): Last 1.818M.

09:45 - S&P Global Manufacturing PMI (Apr-Flash): Expecting 52.5, Last 52.3.

09:45 - S&P Global Services PMI (Apr-Flash): Expecting 50.1, Last 49.8.

10:30 - Natural Gas Inventories (Weekly): Last +59B cf.

11:00 - Kansas City Fed Manufacturing Index (Apr): Expecting 12, Last 11.

The Fed

(All Times Eastern)

Fed Blackout Period.

Today's Earnings Highlights

(Consensus EPS Expectations)

Before the Open: (AXP) (3.99), (HON) (2.52), (LMT) (6.74), (ROP) (4.99), (TMO) (5.24)

After the Close: (INTC) (.01)

At the time of publication, Guilfoyle long TSM, NVDA equity.