Iran Handshake Looks So Close, Semis Steal the Show, ARM and AMD Flex

Crude oil prices dropped significantly on Wednesday before leveling off. Equity markets rallied sharply. Bond investors moved back into U.S. Treasury debt securities forcing yields lower. The catalyst? Axios had reported that the U.S. had presented to Iranian leadership a one-page memorandum of understanding that would "officially" end the two-month war between the two nations.

This framework would, according to Axios, involve an agreement by Iran to a moratorium on nuclear enrichment in exchange for the lifting of sanctions on the Iranian regime and the release of frozen assets. Both sides would agree to end restrictions on maritime transit through the Strait of Hormuz. Separately, France had supposedly sought to accelerate the cooperation of a coalition of international navies to escort tankers through that passage as long as both Iran and the U.S. agree to necessary conditions.

So Far, So Good?

Whoever is representing the Iranian government, on Wednesday, did infer that the U.S. proposal was under review. According to the ISNA news agency (run by Iranian students, not necessarily free, editorially speaking), Iran's foreign ministry had stated that a response from Tehran would or could come through Pakistani mediators once a "conclusion" had been reached. According to the Tasnim news agency (under the thumb of Iran's Islamic Revolutionary Guard), the latest U.S. proposal contained some "unacceptable provisions."

From the U.S. side, President Donald Trump said that the Strait of Hormuz would be "open to all" should Tehran strike a deal with the U.S. The president also warned that should Tehran fail to agree to U.S. terms; U.S. forces would renew the offensive at "a much higher level and intensity than before."

On The Rising of the Sun

Look, look, brave Sol doth peep up from beneath,
Shows us his golden face, doth on us breathe;
He also doth compass us round with glories,
Whilst he ascends up to his highest stories.
Where he his banner over us displays,
And gives us light to see our works and ways.

- John Bunyan (1686)

Thursday Morning

As Wednesday night melted into Thursday morning, front month WTI Crude oil futures traded lower again, hovering around $93 per barrel as Brent crude traded back below $100 per barrel. In addition, Asian stock markets rallied on the prospects for peace in the Middle East as European stocks opened close to unchanged. Asia, on the whole, is more heavily dependent upon the passage of crude and natural gas through the Strait than is Europe or North America. The Nikkei 225 (Japan), for example, rallied 5.6% on Thursday.

Putting added pressure on the prospects for peace and the fragile ceasefire, Israeli forces carried out their first airstrike on Beirut overnight since April 8. U.S. equity index futures are trading higher at zero dark-thirty on Thursday morning, adding to record high U.S. stock market closing prices, but just modestly so.

Marketplace

U.S.-based equities were very strong on Wednesday as our chart had implied. The Nasdaq Composite romped for a gain of 2.02% as the S&P 500 added 1.46%. The small to mid-cap indexes all gained between 1.46% and 1.78%. Looking out to the mid-major indexes of narrower scope, the Philadelphia Semiconductor Index stole the show, tacking on 4.48% for the day led by Advanced Micro Devices  (AMD)  and Arm Holdings  (ARM) . Those two stocks were up 18.6% and 13.6% respectively. ARM has given back a rough 6% overnight after reporting the firm's quarterly financial results last night.

Breadth

Nine of the 11 S&P sector SPDR ETFs closed out the regular Wednesday session in the green, obviously led by tech  (XLK) , followed by the industrials  (XLI)  and materials  (XLB) . Energy  (XLE) , for clear reasons, suffered a horrific session. Growth and cyclical sectors easily outpaced defensives for the day.

Winners beat losers by better than a two-to-one margin at the NYSE and by nearly two-to-one at the Nasdaq. Advancing volume took a majority, but not commanding share of activity across the listing of both of New York's equity exchanges (66.4% - Nasdaq, 60.6% - NYSE).

Trading volume soared, by the way, which is a very bullish signal on a green candle day. Aggregate trade increased 24.6% on a day-over-day basis across NYSE-listings and by 9.6% across Nasdaq-listings. Trade across the membership of the S&P 500 on Wednesday was at its heaviest since March 20th, which was the last "Triple-witching" expirations event. To put it bluntly, professional money, which has been moving back into equities for almost a month and a half, really picked up the pace on Wednesday. ​

Just look at the recent action. It's a real work of beauty. A word of caution? The chart is not worried. That said, Relative Strength is now in technically overbought territory even if the daily moving average convergence divergence is still fired up as it has been for almost six weeks. ​Will the news of a signed peace deal cause a "sell the news" day of profit-taking? That's unclear. We do know, however, that a failure to agree to peace will cause a negative algorithmic reaction. In the meantime, we all look smarter than we really are.

Related: Knocking on Giddy's Door

Do We Need to Worry?

Maybe. As someone who suffered the nasty effects of long-Covid for a couple of years, I am watching this story. We know that three people, a Dutch couple and a German individual have died in the outbreak of the Hantavirus on the cruise ship MV Hondius. There were eight conformed or at least suspected cases in all. That said, at least 40 people left the ship on the remote South Atlantic island of St. Helena after the first passenger passed away.

The female of the Dutch couple was one of those. She departed with her husband's body at St. Helena then flew to Johannesburg, South Africa, where she collapsed and died at the airport. Authorities across South Africa and Europe are trying to track those who left the ship and who they may have contacted. One man has tested positive for this virus in Switzerland. The New York Times is reporting that people in three U.S. states -- California, Georgia and Arizona -- are being monitored for possible infection.

Hantavirus typically can pass from rodents to humans through feces, saliva or urine. The virus can cause severe respiratory illness and can obviously be fatal. That said, human-to-human transmission is rare. In the three confirmed cases on that cruise ship, the patients tested positive for the Andes strain, which is transmissible among humans.

Economics

(All Times Eastern)

08:30 - Initial Jobless Claims (Weekly): Expecting 201K, Last 189K.

08:30 - Continuing Claims (Weekly): Last 1.785M.

08:30 - Non-Farm Productivity (Q1-adv): Expecting 1.5% q/q, Last 1.8% q/q, SAAR.

08:30 - Unit Labor Costs(Q1-adv): Expecting 2.7% q/q, Last 4.4% q/q, SAAR.

10:00 - Construction Spending (Feb & Mar): Last -0.3% m/m.

3:00 - Consumer Credit (Mar): Last $9.48B.

The Fed 

(All Times Eastern)

2:05 - Speaker: Cleveland Fed Pres. Beth Hammack.

3:30 - Speaker: New York Fed Pres. John Williams.

Today's Earnings Highlights 

(Consensus EPS Expectations)

Before the Open:  (BDX)  (2.78),  (DDOG)  (.51),  (MCD)  (2.78)

After the Close:  (CRWV)  (-.89),  (LYFT)  (.30),  (MCK)  (11.57),  (RKLB)  (-.04)

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