Rocket Lab Is on My Radar, Market Shifts Focus on Tariff Deal, Semis Pop

It did not take long for US markets to move from focusing on a potential trade war with the European Union on to the next thing. In the space of a few hours, risk assets moved from reflecting relief that such a trade war would not happen to showing caution as negotiations continue between the US and China. These markets are also showing some caution ahead of Wednesday's Federal Open Market Committee policy meeting and ahead of not only Friday's employment report for July, but the president's own deadline (also Friday) for trading partners who have not reached agreements with the US.

On Monday, the US delegation led by Treasury Secretary Scott Bessent met with their Chinese counterparts led by Vice Premier He Lifeng in Stockholm. The idea is to either make progress on reaching a broader trade deal than the current "trade truce" in place or at least extend that truce. The current deadline for one or the other to occur is Aug. 12.

In an interview televised at Fox News, when asked if rumors of a 90-day extension to that deadline were true, Commerce Sec. Howard Lutnick said, "Is that a likely outcome? Sure, it seems that way, but let's leave it to President Trump to decide." Lutnick did add that the president is currently considering a number of possible deals that have been proposed by nations trying to beat that Aug. 1 deadline.

Lutnick commented, "That's what we're going to do this week. We're going to basically - he's going to consider a few deals, of course he will, but basically what he's going to do is he's going to set the tariff rate for everybody and do that by the end of the week." 

South Korea is said to be one major trading partner trying to beat the deadline and is rumored to be in discussions over how much of an investment in the US and in US projects to commit to as both Japan and the EU have made such commitments.

Reality Check

It really is just stunning to me that no prior US president ever thought to leverage the US consumer and access to US markets to improve the domestic economic landscape for the middle- and lower-income classes. In a world dominated by politicians and academics, it becomes so clear to see how in over their heads they really are when up against someone who spent an entire career negotiating large business deals.

The US does have a huge advantage in these negotiations at the moment. That said, in all honesty, this is a one-time opportunity. Trade will become more balanced than it has been for decades. That's inevitable and it won't take long for the rest of the planet to start electing leaders with actual real-world experience.

A Different Kind of Deadline

Speaking from Scotland, Pres. Trump said that he would now give Russian Pres. Vladimir Putin just 10 or 12 days to reach a cease-fire agreement with Ukraine. A failure to come to some kind of peace will likely result in increased economic pressure on Russia and Russia's trading partners from the US.

Less than a month ago, the president had given Russia 50 days to come to a peace, but as the president said on Monday, "We just don't see any progress being made." 

The president added, "We thought we had that settled numerous times," and "Then President Putin goes out and starts launching rockets into some city." Finally, the president said, "You know, this has happened on too many occasions, and I don't like it."

Marketplace

Despite that at the headline level, US equity markets set new record closing highs, Monday was really a broadly negative day for stocks. The S&P 500 gained a single point or 0.02%, while the Nasdaq Composite rallied just 0.33%. Both were good enough for new records. Semiconductor stocks rallied on Monday.

The Philadelphia Semiconductor Index popped for a gain of 1.62%, again led by Advanced Micro Devices AMD. That stock was up another 4.32% after reports circulated that the company was considering price increases for its higher-end, AI-capable MI350 chips. That chip is a competitor to Nvidia's NVDA Blackwell B200 chip. Last Tuesday was the last day that AMD did not rally for a gain of at least 2%.

Interestingly, all of the small- to mid-cap indexes closed out Monday in the red, as did the bank stocks. Only three of the 11 S&P sector SPDR ETFs closed out the session in the green, led by Energy XLE, after the EU trade agreement, and Technology XLK. Four of the five bottom rungs on the daily performance tables were occupied by defensive sectors, which counter-intuitively signals improved economic growth.

Breadth was, however, poor. Losers beat winners at the NYSE by a little less than a 2 to 1 margin and by a rough 3 to 2 at the Nasdaq. Advancing volume took just a 29.4% share of composite NYSE-listed trade and a 34.9% share of composite Nasdaq-listed activity. Aggregate trading volume was up small on a day over day basis across NYSE-listings, but down small across Nasdaq-listings. Additionally, trading was light across the membership of the S&P 500 for a second straight session.

Worried About Rocket Lab?

It's more like I'm paying attention. Rocket Lab RKLB took a 4.6% beating on Monday as five-star rated (by TipRanks) analyst Jeff Van Rhee of Craig-Hallum initiated the name with a "hold" rating and a $54 target price. Readers will recall that we had a $52 target price on this stock and canceled that target on July 17, as we had acknowledged that the shares needed to consolidate, which is exactly what has happened. Rocket Lab will report on Aug. 7.

Importantly, a new, less positive pattern may be emerging for this stock, but there has been support where it needed to be present. Let's take a look...​

​Readers will see that since the stock ended its parabolic run that Relative Strength has left technically overbought territory. Below the chart, readers will also see that within the daily Moving Average Convergence Divergence, the histogram of the 9-day exponential moving average has entered negative territory, while the 12-day exponential moving average crosses below the 26-day EMA. These are bearish looking indicators. One positive takeaway would be that at least on Monday; it did appear that support had been found at the upper trendline of our Andrews' Pitchfork pattern.

The question now becomes, is my Pitchfork pattern even valid? Maybe not. If I remove it and replace it with what I may see emerging at this time, both you and I, assuming you're invested, will not like it. Now, take a look at this:​

Now, this is conjecture. For the purposes of illustration and trying to see where the puck is going, I have drawn a complete head and shoulders pattern (which is bearish) whereas the actual forming of such a pattern is only a little more than half-way into its development. The downside pivot in this hypothetical model would likely show up around the $37 level. Am I selling some now? No, as readers know, I sold some when my $52 target was taken out. Am I adding on this weakness? Not until the chart tells me to. I would guess that I would write about it when I see that a reason to act has emerged. No need to act rashly. Not even accounting for profits taken higher, we're still up 377% on this position as I bang out this note.

Economics

(All Times Eastern)

08:30 - Goods Trade Balance (Jun): Last $-96.59B.

08:30 - Wholesale Inventories (Jun-adv): Expecting -0.1% m/m, Last -0.3% m/m.



08:55 - Redbook (Weekly): Last 5.1% y/y.

09:00 - Case-Shiller HPI (May): Expecting 2.9% y/y, Last 3.4% y/y.

09:00 - FHFA HPI (May): Expecting -0.2% m/m, Last -0.4% m/m.

10:00 - CB Consumer Confidence (Jul): Expecting 95.7, Last 93.0.

10:00 - JOLTs Job Openings (Jun): Last 7.769M.

10:00 - JOLTs Job Quits (Jun): Last 3.293M.

4:30 - API Oil Inventories (Weekly): Last -577K.

The Fed 

(All Times Eastern)

Fed Blackout Period.

Today's Earnings Highlights

(Consensus EPS Expectations)

Before the Open: MRK (2.03), PYPL (1.30), PG (1.42), RCL (4.08), SPOT (2.00), UPS (1.57)

After the Close: MDLZ (.68), QRVO (.63), STX (2.44), SBUX (.64), V (2.85)

At the time of publication, Guilfoyle was long AMD, NVDA, RKLB equity.