The Morning Call
6/18/26
The Market is closed tomorrow; so
I will see you on Monday.
The
Market
Technical
Wednesday in the
charts.
https://www.zerohedge.com/markets/markets-manic-oil-flat-trump-warsh-dominate-liquidity-plummets
Summary:
Despite Trump's headline roulette (bombs away, Israel
chill, reserves tight, MOU signing timing), markets were relatively
calm into The Fed (with strong retail sales and home sales)... but
a dramatically hawkish shift in the 'dots' and the statement
sent stocks and gold lower and (short-end) bond yields and the dollar
higher. A manic day for many who weren't expecting such a shift from
Warsh:
Wednesday
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
Note: the S&P
failed to reach its old high and has now set a new lower high. Support exists
at its 50 DMA (~7301) which the index bounced of off to start the latest rally
and the prior low (~7267)---if it breaks that level, the index will have set a
lower high and a lower low, indicating a developing downtrend.
Margin debt jumps
to record high.
https://www.advisorperspectives.com/dshort/updates/2026/06/16/margin-debt-finra
Semis: the new
systematic risk.
https://www.zerohedge.com/the-market-ear/semis-new-systemic-risk
Summary:
Semiconductors keep ripping, but the story is no longer just about earnings and
AI. The sector has become so large and so crowded that semiconductor volatility
is increasingly becoming a market risk in itself. The trend remains
powerful. The question is whether investors are prepared for the next
volatility shock. Semiconductors have become so large and so crowded that they
are increasingly a source of market risk. Rising semiconductor volatility
combined with elevated investor exposure raises the odds of more frequent VaR
shocks, similar to the selloff seen in early June, writes JPM's Nikos. The
concentration is becoming extreme. Semiconductor stocks now account for a much
larger share of global equity market capitalization than their share of
revenues would justify. In fact, the gap between market cap share and revenue
share has surpassed 6x, more than double the equivalent ratio for the
Magnificent 7. The more crowded the trade becomes, the greater the risk that
even a modest disappointment triggers forced selling.
Thursday morning
setup: Futures rebounded from the post-FOMC selloff, and oil prices fell
as Trump signed the Iran MOU two days early to end the war in the Middle
East (in the symbolic Palace
of Versailles of all places) and some energy shipments began to
transit the Strait of Hormuz. As usual, tech led the parade higher. As of
8:00am ET, S&P futures were up 0.6%, but off overnight session highs,
partly unwinding a more than 1% decline after Kevin Warsh signaled the Fed may
have to raise interest rates this year to contain inflation; Nasdaq gained
1.3%; pre-market all Mag 7 are higher led by AMZN (+1.2%), META (+1.1%) and
NVDA (+1.1%), reversing some of yesterday’s losses. Intel shares jumped more
than 8% in premarket trading after Trump said the firm struck a chipmaking deal
with Apple (a rehash of previous news but to this Pavolvian market, everything
seems to be brand new). Overnight, the biggest headline was that the
US/Iran MOU was officially in effect (final deal within 60 days, waiver for
Iran to export oil, a $300bn reconstruction fund, terminating all types of
sanction, per Axios). Bond yields are lower led by the long-end of the curve as
2y is still anchored by Fed commentary yesterday; 2y and 10y are -1bp and -4bp
lower, respectively, the 10Y trading at 4.46%. The USD continues to climb with
the DXY adding 53bp this morning. Brent slid 1.4% to around $78.50 a barrel and
touched its lowest level since the start of the war while WTI fell -2.6%
to $74.78; precious metals are largely flat this morning. US economic data
calendar includes weekly jobless claims, June Philadelphia Fed business outlook
(8:30am), May Leading Index (10am) and April TIC flows (4pm)
Fundamental
Headlines
The
Economy
US
Weekly jobless claims totaled 226,000 versus
expectations of 225,000.
May pending home sales
were up 3.8% versus consensus of +0.8%.
The June
Philadelphia Fed manufacturing index came in at 10.3 versus predictions of
10.0.
International
The April UK
unemployment rate was 4.9% versus estimates of 5.0%; April (3 mo./YoY) average earnings
were up 4.4% versus up 4.0%.
April
EU YoY construction output rose 0.9% versus projections of -1.6%.
Other
Consumers on a wealth-effect spending spree.
https://bonddad.blogspot.com/2026/06/even-adjusting-for-gas-prices-consumers.html
Iran
Initial analysis of the MoU---at least as we
think we know it:
It
may not be as good as Obama’s version.
Summary:
The emerging nuclear accord with Iran may secure fewer restrictions than the
2015 deal negotiated by the Obama administration. The potential agreement will
build on a memorandum of understanding that states Iran's stockpile of
near-bomb-grade uranium be "adequately addressed", leaving unresolved
the fate of enough material to fuel multiple weapons. The US has agreed to end
all sanctions against Iran, release frozen funds, and allow Iran to resume oil
exports, in exchange for a promise from Iran that it will never produce nuclear
weapons.
It could transform
America’s Middle East policy.
In the interest of
levity.
Oh
No! Trump Negotiates Deal With England And Now They Have The Colonies Back |
Babylon Bee
The Strait of Hormuz will never really open
again.
https://www.semafor.com/article/06/16/2026/hormuz-will-never-really-be-open-again
Monetary
Policy
FOMC
holds rates steady, remains divided but more hawkish (i.e., one to two rate
hikes in 2026). Warsh cuts length of policy statement and the post meeting
presser---in which he sounded more hawkish than many expected.
Note: if Warsh is
really serious about the Fed’s commitment to bring inflation under control: (1)
the Market hates tight monetary policy and (2) it sets up a clash between monetary
policy [shrinking liquidity] and fiscal policy [huge deficits = need for more
liquidity]---not good [short term but good long term] for the economy or the
Market. I will expand on these themes in my next post.
How
big a role should duration play in setting Fed policy?
https://stayathomemacro.substack.com/p/a-good-family-fight
Fiscal
Policy
How much has the government borrowed to pay
back what it owes itself?
https://politicalcalculations.blogspot.com/2026/06/how-much-has-us-government-borrowed-to.html
The rise of the American state owned
enterprise.
https://www.advisorperspectives.com/commentaries/2026/06/17/rise-american-state-owned-enterprise
AI
AI---a shortcut or the chance to do more
powerful work.
https://seths.blog/2026/06/degrees-of-freedom-3/
Apple
hikes prices to offset soaring memory costs.
Investing
Could the AI
bubble burst be worst than the dot com bust?
https://thehill.com/opinion/finance/5925202-tech-bubble-ai-driven-growth/
Most stocks aren’t
worth owning.
https://www.morningstar.com/stocks/why-most-stocks-arent-worth-owning
Bull market pull back---why the S&P held
its 50 DMA.
The Iran shock
reinvented tech as a safe haven.
https://www.capitalspectator.com/the-iran-shock-reinvented-tech-as-the-new-safe-haven/
Will there be a
peace dividend?
https://giftarticle.ft.com/giftarticle/actions/redeem/d318fc74-8a8a-44d7-91e5-27df4bd7f1a0
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