Bond yields, oil and the dollar are surging this morning as US futures tumble from all-time highs, with Tech underperforming driven by a series of factors including i) surging energy prices on lack of Iran war progress, ii) elevated positioning into options expiry; iii) Central bank repricing, iv) Tech sell-off driven by higher yields, and v) strikes at Samsung Electronics. The combination of stronger consumption and higher inflation is also a factor today. As of 8:00am ET, S&P futures are down 1.0% and Nasdaq futures slide 1.4% with the momentum brigade of Semis and Memory dumping (that bastion of the memory trade, Korea, sold off last night, its worst day since early March). The losses point to a bleak end to a week in which chipmakers led a narrow rally despite steadily rising yields and the absence of a US-Iran deal. Cyclicals ex-Energy are, unsurprisingly, seeing material underperformance to Defensives. Bond yields are up 4-7bps as the Dollar looks to complete its first 5-day win steak since March. In commodities, Energy is leading with Brent rising 2.3% to above $108 a barrel. Helima Croft, global head of commodity strategy at RBC Capital Markets, said an expectation that the Strait of Hormuz would reopen within the next month was “magical thinking.” Precious metals tumble on dollar strength. Today’s macro data releases are all B-grade, including Empire Mfg, Industrial / Mfg Production, and Capacity Utilization; none are market-moving.

In premarket trading, Mag 7 stocks are mostly lower: Microsoft (MSFT) rises 0.7% after Pershing Square Chief Executive Officer Bill Ackman said he’s taken a new stake in the compan ( Alphabet -1.6%, Amazon -1.5%, Apple -1.2%, Nvidia -2%, Meta -0.7%, Tesla -1.9%)

In other corporate news, Kioxia said it would list its shares in the US as it reaps the benefits of a global memory chip shortage that’s ratcheted up prices of the vital component. OpenAI CFO said the ChatGPT maker may raise more capital, as the company races to secure computing power to meet surging AI demand.

A broad selloff in bond markets dragged stocks lower, bringing a sudden halt to the artificial intelligence-fueled equity rally that has pushed the S&P 500 from one record high to the next. The sentiment reversal reflects some profit taking after recent gains, and a lack of concrete progress between Trump and Xi beyond cordial niceties. AlsoFed Chair Powell’s term comes to an end today, just as the 10-year Treasury hit 4.5% for the first time overnight since June,prompting a swoon in equity futures.

With a summit between President Donald Trump and China’s Xi Jinping ending without any path to resume flows through Hormuz, the impasse between the US and Iran is moving back into focus. Traders will now watch the next steps the two countries take after more than two months of war.

“There’s no question that momentum has been so aggressive on the upside that the risk of a correction is there,”Paul Skinner of Wellington Management told Bloomberg TV. “With a background of bond markets looking unsettled, with the problem of inflation, with the Strait of Hormuz not having a solution out of that Summit, I think there definitely is some volatility to come.”

Brent crude rose 2.3% to above $108 a barrel. Helima Croft, global head of commodity strategy at RBC Capital Markets, said an expectation that the Strait of Hormuz would reopen within the next month was “magical thinking.”

“There seems to be an emerging consensus that the Strait of Hormuz will reopen in June because the cost of continued closure will be too high,” she wrote. “We are very skeptical. The optimistic scenario seems predicated on the tenuous assumption that there is a relatively easy policy lever that can be pulled.”

In central bank news, the Governor Barr pushed back against proposals to shrink the Fed’s balance sheet, describing them as wrong and a threat to financial stability. The Fed’s Williams said there’s no reason to raise or cut rates right now.

Meanwhile, the turmoil in UK markets is showing no sign of ending as investors price in the possibility of more expansive fiscal policy under a potential successor to Prime Minister Keir Starmer. Manchester Mayor Andy Burnham secured a pathway for a future challenge, unsettling investors who were rattled last year by his comments that the country was “in hock” to bond markets. The prospect of a seventh prime minister in 10 years “is not a record of which any nation would be proud,” said Russ Mould, investment director at AJ Bell. “It is contributing to how the UK has the highest 10-year bond yield in the G7.”

Source: ZeroHedge News