The Iran Conflict has gone from renewed saber-rattling to shots fired, and now, back to the blockade. Crude oil surged yesterday throughout the session with each successive headline.

Waller’s Colorful World

Fed Governor Christopher Waller gave a presentation that candidly admitted defining inflation is akin to defining pornography – you know it when you see it.

Bond yields moved higher into zones associated with rate hikes, and the market still held above the 50-day moving average.

Hang On

The Volatility Index (VIX) surged more than 9%, as the single-stock volatility premium is near the cycle high.

Market Held Up Better Than Narrative

The stock market held up better than anyone might have imagined. More than 54% of names finished higher, and six of eleven sectors also finished in the green. There was even rotation within Technology (XLK); abject fear would have led to a mass exodus from the entire sector.

Defensive Session

Value, revenue, and core outperformed in the classic defense playbook. I still can’t believe quality can’t catch a bid.

Nasdaq-100

The NASDAQ-100  (NDX) is edging lower, but holding above 28,500 – 29,000, which has become a major support level.

Closing above 30,000 should spark a retest of the all-time high.

What Turns This Around?

• Inflation data below the consensus
• Strong Earnings and Guidance

The market is on the back foot, but the underlying value proposition gets stronger each session. Take care not to panic.

Wild Cards

1. The action in South Korea’s KOSPI Index sets the tone for the U.S. market, but the action there is more about emotional unwinding and margin calls triggering margin calls. That index has never been cheaper.
2. Iran War headlines.
3. Earnings warnings – so far, not too many, which is hugely bullish.
4. Key support points fail.

Today’s Session

June CPI came in substantially below consensus.

• Headline: 3.5% from 4.2% and consensus of 3.6%
• Core: 2.6% from 2.9% and consensus of 2.8%

The month-to-month plunge was far greater than any of the experts had on their Bingo card.

Of course, the fear porn folks won't miss a beat and get back to mitigating the report. Many will chalk it up to lower crude oil and gasoline.  It was a lot more, and it’s a lot more encouraging than the media will admit.

IBM Crushed

International Business Machines Corporation (IBM) missed its earnings by a country mile, and while management tried to lay the blame on a late purchase decision that focused on software ahead of higher prices, their consulting business was flat, which suggests maybe AI is a threat well beyond memory orders.

It is more than just delays.

I think IBM is on the right track with quantum but horrifically behind elsewhere, and execution continues to be a major problem.

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