Why I’m Eyeing Lockheed, RTX; Fire in Hormuz; SpaceX Lands on … Nasdaq 100
As U.S.-Iran truce hits bump after ship hit in Hormuz, I’m eyeing adding to these defense stocks; also the latest on NATO, SpaceX and Monday’s market.
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Here we go again. Has anyone at least considered that these guys will always attempt to disrupt the peace process? It’s pretty obvious that they have no interest in a peaceful coexistence with the U.S., with Israel, or even with their Islamic neighbors. It’s also pretty obvious that the more radical voices within that nation have no interest in sharing internal power with those holding more moderate views within their own government. Of course, I speak of Iran, the persistent problem child of the Middle East.
Overnight, U.K. Maritime Trade Operations reported that a tanker ship had been hit by an unknown projectile on its port side roughly eight miles east of Limah, Oman, and that this projectile had caused a fire. The Wall Street Journal, among other news outlets, reported that Iran’s Islamic Revolutionary Guard had fired missiles (or drones or both) at two commercial vessels traversing the Strait of Hormuz early Tuesday morning.
This attempt to renew the violence comes as Iran mourns former Supreme Leader Ayatollah Ali Khamenei, who was killed early in the recent, but short, war between the U.S., Israel and Iran and obviously threatens to complicate ongoing negotiations between the U.S. and Iran. Last month, the U.S. and Iran’s more moderate leaders had agreed to a 60-day ceasefire that would be used to negotiate a settlement. Over the weekend, Iran’s Revolutionary Guard warned ships over maritime radio, “Our missiles and drones are ready to fire at you.”
According to that report in the Journal, one of those vessels that came under attack was a Qatari LNG tanker, the Al Rekayyat, which is owned and managed by Nakilat. Early on Tuesday a message was broadcast over maritime radio from the location of that ship… “Engine room fire and full of smoke. Unable to assess further damage. All crew are safe and mustered on the starboard side.” Daily traffic through the Strait of Hormuz had recently crept up to between 30 and 60 crossings from literally zero. While that is an improvement, it’s still well below the pre-war average of roughly 125 daily crossings.
Oil Heat
This has put upward pressure on crude oil prices, downward pressure on prices for U.S. Treasury debt securities (higher yields), and downward pressure on U.S. equity index futures (outside of the Dow 30, which is meaningless). I am likely to increase Sarge-folio long positions in both Lockheed Martin (LMT) and RTX (RTX), even above net basis, ahead of the opening bells in New York, especially if I see weakness.
I Don’t Know
People look to me and say
“Is the end near, when is the final day?”
What’s the future of mankind
How do I know, I got left behind, I’m lost
– Osbourne, Rhoads, Daisley (Ozzy Osbourne), 1980
Crazy Train
Crazy, but that’s how it goes
Millions of people living as foes
Maybe it’s not too late
To learn how to love
And forget how to hate
– Osbourne, Rhoads, Daisley (Ozzy Osbourne), 1980
On That Note…
The NATO summit will kick off in Ankara, Turkey on Tuesday and go on through Wednesday. U.S. Pres. Donald Trump is present and said to be quite unhappy with the lack of support shown by traditional U.S. allies in Europe for the war in Iran. While not a soul is expecting the U.S. president to try to unilaterally terminate US membership in the post-WWII Cold War era military alliance, it is very likely that European leaders should prepare themselves for a verbal beat-down.
This alliance and especially U.S. participation in, and financing of, have protected Europe in aggregate from Soviet (Warsaw Pact) and then Russian aggression since the last 1940s. The very concept of NATO-inspired deterrence is that if one member nation comes under attack, American military might and funding would rush to that nation’s aid.
The current fear across allied Europe is that Pres. Trump will reduce U.S. presence in the region, leaving them in a position to have to defend themselves and fund their own militaries. Given Russian Pres. Vladimir Putin’s reputation for unpredictability and aggressive nature, this could leave these nations less than prepared should Putin threaten borders beyond Ukraine.
Monday Funday
On Monday, stocks maintained or regained their positive momentum after a sloppy holiday week. Or so it seemed. The S&P 500 added 0.72% while the Nasdaq Composite gained 1.12%. The Nasdaq 100, which has not always moved in unison with the Nasdaq Composite of late, trekked 1.26% higher. The small-to-medium-cap indexes rallied, but underperformed broader markets, while the semiconductors and banks rallied sharply.
Breadth was not quite as strong as some may have thought on Monday. Only five of the 11 S&P sector SPDR ETFs closed out the regular session in the green, led by technology (XLK), and followed by the financials (XLF) and industrials (XLI). On a positive note, the bottom four rungs on the daily performance table were occupied by sector ETFs of a defensive nature. Health care (XLV), which led to the upside last week, finished Monday in last place.
Winners beat losers at the NYSE on Monday by a rough five-to-three margin and at the Nasdaq by about three to two. Advancing volume, however, took only a 58.9% share of composite Nasdaq-listed trade and just a pitiful 51.5% share of composite NYSE-listed activity on Monday. Making Monday count for even less, aggregate Nasdaq-listed trading volume was down 17.9% on a day-over-day basis from Thursday, while aggregate NYSE-listed volume was down 9%. Monday was the lightest trading session across the membership of the S&P 500 since June 12.
By The Way…
Soccer is a great sport. Both of my sons played the game, and both were very good players who scored a lot of goals at the youth/scholastic level. I grew to enjoy the game and even coach my sons’ teams, despite having only played one year of high-school soccer myself. That was only because not enough kids tried out for soccer back then to put 11 kids on the field, and they had to fill out the team with players from other sports. We were put in games before we even knew the rules. I was a hockey/baseball/distance running guy at heart.
The fact is, the U.S., while able to compete at a much higher level than in the past, is not ready for the elite levels of international men’s soccer at this point. We’ll get there, but this is a for-profit nation. As long as professional (North American) football, basketball, baseball, hockey, golf and even auto racing pay elite athletes a lot more than does pro (domestic) soccer pays, those sports will skim the talent pool well before the U.S.-based soccer leagues can ever get their crack at them.
What Did You Expect?
SpaceX (SPCX) joins the Nasdaq 100 ahead of the opening bell this morning. This inclusion triggers significant passive demand across the world of funds bearing allocation and weighting mandates tied to that prestigious index. At least six (more by day’s end) broker-dealers, according to Bloomberg News, to include both Goldman Sachs (GS) and Morgan Stanley (MS) who participated in the IPO, (at least 12 now by my count) have already started coverage (now that the quiet period is over) with “buy-equivalent” ratings.
Economics (All Times Eastern)
08:15 – ADP Employment Change (Weekly): Last 30.75K.
08:30 – Balance of Trade (May): Last $-55.9B.
08:55 – Redbook (Weekly): Last 10.5% y/y.
4:30 p.m. – API Oil Inventories (Weekly): Last -6.072M.
The Fed (All Times Eastern)
No public appearances scheduled.
Today’s Earnings Highlights (Consensus EPS Expectations)
No significant quarterly earnings scheduled.
At the time of publication, Guilfoyle was long LMT, RTX equity.
