Morning Commentary

All the major equity indices were higher, with the NASDAQ Composite setting the pace.
It felt like the market was on autopilot yesterday, which was at once thrilling but also worrisome. The great news is that we're seeing winning participation. Of course, it was Technology (XLK) names that did the heavy lifting. Industrials (XLI) led the way, with transportation being the strongest component. Energy (XLE) stumbled, and Utilities (XLU) were also deeply in the red.

It's all about momentum and growth.

Market Breadth
Market breadth was strongly positive, but not as strong as one might imagine given the strength of the overall session.
There were a fair number of decliners and new lows on the NASDAQ Composite. Volume was the story as investors piled into the hottest stocks.
Concerning
Arista Networks (ANET) posted a strong beat but warned of supply chain issues, and that knocked the stuffing out of the stock.

The Fed’s Global Supply Chain Pressure Index surged, and I suspect more tech companies will cite limited supply and higher prices for key inputs like silicon.

Semiconductors (SMH) remain on fire, powered by earnings and greater visibility. Still, the Relative Strength Index (RSI) is flashing major overbought conditions so that we would expect a noticeable pullback soon.

Great work from Ned Davis Research addressing semiconductor “bubble” concerns. The current level is cause for concern, but compared to the dotcom run, there is a lot more room to cover.

After the Close
Earnings reactions have now entered the famine stage. Stocks are getting bid up with double-digit moves or beaten down with double-digit declines.
Headline results and even guidance, which are mostly beats, fail to explain the movement in these stocks.
Today’s Session
Futures are higher as oil prices drop back to the $90s, with the market awaiting Iran war updates. Earlier, Saudi State TV noted agreements are being discussed to ease the blockade and allow stranded ships to resume transit through the route.

Initial jobless claims rose to 200k from 190 prior and beat consensus of 205k.

Continuing Claims hits its lowest level since early 2024 at 1.766 million.

Nonfarm productivity rose 0.8%, but was still weak compared to last month’s 1.6% increase. Unit labor costs rose 2.3%, but below last month’s 4.6%.

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