The Morning Call
6/24/26
The
Market
Technical
Tuesday in the
charts.
https://www.zerohedge.com/markets/us-tech-trounced-bonds-bid-korean-butterfly-flaps-its-wings
Summary:
Oil oscillations took a back seat to Korean carnage today as the flapping
of levered ETF butterflies triggered a tornado in US big-tech (led by
Semis), dragging down Nasdaq (Dow green though). Heavy
negative delta 0-DTE flow today. Bonds (mixed macro) and the dollar
were bid as Bitcoin and bullion were dumped again. The question
on everyone's lips: Are levered Korean retail traders the US Tech
boom Giant killer? It was a soft-data tsunami today (and the picture was
anything but clear): Philly Fed Services ugly (and contracting), Richmond Fed
Manufacturing and Business Conditions ugly (and contracting), but US Composite
PMI jumped to 5 month highs led by Manufacturing (at 49-month highs) amid signs
of price pressures cooling. ADP's weekly employment indicator remains near its
highs though as labor remains resilient. Still, it continues to be NOT about
macro as stocks and bonds decouple from any head- or tail-wind from oil...
Finally, Apollo's Chief Economist, Torsten Slok, lays
out the top three macro questions for traders at the moment:
1) Middle East: What are the
implications if some tanks reach critical levels somewhere in the world,
including distillate fuels in the US?
2) AI: What happens if companies start
limiting their token budgets meaningfully because they are only seeing weak
ROI, and as a result, compute demand either slows down or shifts to Chinese
models?
3) Inflation outlook: With inflation
trending higher, what are the implications for equity and credit markets if the
Fed hikes in September and December, as currently priced in fed funds
futures?
The answer in all these
cases is not straightforward but we would say that the market remains
more than willing to look past all these potential pitfalls... until now. Is
this week's decline a canary in the coalmine? And will Korea's flapping
butterfly wings chaotically trigger a global delivering in the chase for
bottlenecks?
And
just to rub some salt in that wound, buybacks ain't gonna save you this
time (and not just because hyperscalers FCF is negative):
Tuesday in the
technical stats.
https://www.barchart.com/stocks/momentum
https://www.barchart.com/stocks/market-performance
https://www.barchart.com/stocks/sectors/rankings
https://www.barchart.com/stocks/signals/new-recommendations
The AI trade is
getting uncomfortable.
https://www.zerohedge.com/the-market-ear/ai-trade-getting-uncomfortable
Summary:
The AI trade is starting to look crowded in all the right places and vulnerable
in all the wrong ones. Tech volatility is exploding, systematic flow risks are
building and the market continues to reward the suppliers while punishing the
spenders. Nothing is broken yet, but the rubber bands are getting stretched. The
market continues to reward AI suppliers while punishing AI spenders. Semis,
memory and infrastructure have captured the upside, while hyperscalers face
growing questions around returns and capex intensity.Meanwhile, increasingly
capable models are emerging from the East at a fraction of the training cost
incurred by Western AI leaders. Yet the entire AI ecosystem remains priced for
ever-rising capex. Nobody is positioned for "slightly less." The
figures are starting to get uncomfortable. Projected selling from
options-related flows, leveraged ETFs and vol-control funds is becoming
absolutely massive.
How far can the
rubber band get stretched?
Summary:
The breaking point was always likely to be when one of the major spenders
concludes that shareholder returns are better served by spending slightly less.
The problem is that “slightly less” is not embedded in anyone’s
assumptions.The entire AI complex is priced for ever rising capex as
inference demand grows. The Nasdaq appears to have failed to make a
decisive new high.At the same time, there are increasingly visible issues
surrounding the largest market-cap companies in the world.That feels like an
unstable equilibrium.
We
are through the tailwinds of last week’s expiry and now have line of sight into
month-end and quarter-end rebalancing flows, which in theory should
favor selling equities and buying bonds. Market structure is also becoming less
supportive.Dealer gamma is lower around current spot levels and declines
further on the way down.CTAs are still buyers on many measures but remain
highly convex to the downside. A glance at the prime brokerage numbers
largely confirms what price action is telling us: the world has
become one exceptionally concentrated trade.AI is driving the
equity market, the equity market is driving economic expectations, and all
roads increasingly lead back to the same handful of stocks. Risk that the
market has been ignoring the highly deflationary forces in token economics.
Wednesday morning setup;
US stocks are set for a rebound with equity futures higher as Semis and Tech
stage a partial recovery from yesterday’s "Chip-Wreck" as KOSPI
retraced about 20% of its losses ahead of earnings from the single-biggest
contributor to US outperformance this year: Micron’s third-quarter numbers are
an even bigger deal than usual, following Tuesday’s shakeout of an overcrowded
AI trade that’s has been priced for perfection. As of 8:00am ET, S&P
500 futures are 0.3% higher with Nasdaq 100 contracts up 0.5%. In premarket
trading, equities are boosted by a bid for Semis (MU +3.6% with earnings
tonight) with most of Mag7 higher. Within Cyclicals, Discretionary and
Industrials are the standouts as Energy / Fins are mostly lower. Cyclicals
poised to lead Defensives with Momentum factor flat. Bond yields are lower
1-2bp as the yield curve flattens, pushing 10Y yields; USD remains bid even as
real yields decline. DXY set a new 52-wk high today. Cmdty remain under
pressure dragged by the Energy complex and weakness in Metals. Today’s macro
data focus is on Home Sales ahead of tomorrow's update on GDP, PCE, Personal
Income / Spending, Cap / Durable Goods, and weekly Claims.
Fundamental
Headlines
The
Economy
US
Weekly mortgage
applications rose 1.0% while purchase applications declined 1.0%.
Month
to date retail chain store sales were up 10.0% versus +9.4% in the prior week.
https://bonddad.blogspot.com/2026/06/consumer-spending-has-turned-red-hot.html
The June flash manufacturing
PMI was 55.7 versus estimates of 54.5; the flash services PMI was 51.3 versus
51.0; the flash composite PMI was 52.2 versus 50.8
The
June Richmond Fed manufacturing index was 4 versus expectations of 9.
International
The June German
business climate index came in at 85.6, in line; the June current conditions
index was 87.0 versus 86.4.
Other
Overnight
News
The US Senate
voted 50-48 to pass a resolution to halt the Iran war unless US President Trump
gets approval from Congress. However, the White House said Congress resolutions
on Iran are non-binding and won't be sent to President Trump, while Trump criticized
the Senate passage of the Iran war powers resolution, which he claimed provides
aid and comfort for the enemy.
The BoJ sees the
risk of inflation exceeding its 2% target and will conduct additional
interest-rate hikes appropriately, Governor Kazuo Ueda said in speech Wednesday
that reiterated policymakers’ recent messaging
Iran
The first tango in
Lake Lucerne. https://x.com/JoshBlockDC/status/2069047098813690054?ref_src=twsrc%5Etfw%7Ctwcamp%5Etweetembed%7Ctwterm%5E2069047098813690054%7Ctwgr%5E0924bdd8e9caa093d89c2e70ad43737050772d7e%7Ctwcon%5Es1_c10&ref_url=https%3A%2F%2Fwww.powerlineblog.com%2Farchives%2F2026%2F06%2Ffirst-tango-at-lake-lucerne.php
Ukraine, Iran and Occam’s Razor.
https://danieldrezner.substack.com/p/ukraine-iraq-and-occams-razor
Monetary
Policy
Real Treasury
yields rise above 2%. Is the Market
doing the Fed’s job? (if it is, that is good news since the Fed has done a
horrible job)
https://www.capitalspectator.com/real-yields-rise-above-2-is-the-market-doing-the-feds-job/
Fiscal
Policy
Debt hawks ignore history.
The
Financial System
Apollo caps private credit fund withdrawals.
Summary:
Apollo
Debt Solutions, which has roughly $25 billion in assets, capped withdrawals
at 5% of outstanding shares on Monday after investors asked to redeem 16.8%,
according to a shareholder letter. Redemption requests in the quarter were
higher than the 11.2% investors wanted to pull in the prior period. Cliffwater
LLC faced requests to pull 17% of shares from its flagship fund, while BlackRock
Inc. received about 13% earlier this month. Both funds enforced a 5% cap for
such funds, known as business development companies.
Investing
Can tech stocks
keep outperforming?
https://alhambrapartners.com/weekly-market-pulse-markets-review/?src=news
This analyst thinks
they can.
https://www.riskhedge.com/outplacement/the-biggest-ai-investing-mistake
Tech companies
getting money while the getting is good.
The end of cheap capital.
https://hbr.org/2026/06/the-end-of-cheap-capital
The S&P’s
latest changes in its composition.
https://www.carsongroup.com/insights/blog/the-sp-500s-latest-changes-ai-in-consumer-out/
How much of the
S&P 500’s revenues come from overseas?
https://talkmarkets.com/article/how-much-of-the-sp-500s-revenue-comes-from-overseas-1782232562
Spotting bubbles
and calling tops.
https://awealthofcommonsense.com/2026/06/spotting-bubbles-and-calling-tops/
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