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Briefing.com Summary:

*The April CPI report was not good, but maybe not as bad as some feared.

*WTI crude prices have risen back above $100/bbl.

*There is weakness in the semiconductor stocks, AI stocks, and mega-cap stocks for a change.

There were new record highs yesterday for the S&P 500 and Nasdaq Composite, but we'll suggest that they were established somewhat sheepishly. It was another day that saw strength in the semiconductor stocks and certain mega-cap stocks carry the market, which had a large number of stragglers. The equal-weighted S&P 500 ended the session down 0.1%; meanwhile, the retail sector reportedly suffered its worst decline since 2022.

Rising oil prices, rising interest rates, and rising concerns about inflation pressures, the state of the consumer, and the Iran war have combined to keep the stock market under wraps this morning.

Currently, the S&P 500 futures are down 17 points and are trading 0.3% below fair value, the Nasdaq 100 futures are down 202 points and are trading 0.7% below fair value, and the Dow Jones Industrial Average futures are up 20 points and are trading fractionally below fair value.

That negative disposition can be attributed rightly to an exhaustion trade, at least in terms of the weight being applied by losses in the semiconductor stocks and mega-cap stocks in pre-market action. They have been on an absolute tear since the end of March, evoking castigations from some pundits that it resembles the 1999 price action that ultimately gave way to the dot-com bust in March 2000.

The price action, though, is the price action. The upside momentum has been like a spring flower that has drawn loads of trader bees to pollinate it, and they have done an excellent job doing just that. But even worker bees take a rest, and that seems to be the case this morning.

The pre-open weakness is concentrated among the tech stocks, and it is important to note that the weakness was evident before the release of the April Consumer Price Index (CPI) at 8:30 a.m. ET. A 10-yr note yield pushing up to 4.44%, WTI crude prices rising above $100/bbl (currently $100.69), and an attention-grabbing proposal by South Korea's policy chief to fund a citizen dividend with taxes on AI profits conspired to apply some selling pressure.

With respect to the inflation data, total CPI increased 0.6% month-over-month in April, as expected, following a 0.9% increase in March. That left total CPI up 3.8% year-over-year versus 3.3% in March. Core CPI, which excludes food and energy, jumped 0.4% month-over-month (Briefing.com consensus: 0.4%) following a 0.2% increase in March. That left core CPI up 2.8% year-over-year versus 2.6% in March.

The key takeaway from the report is the elevated inflation readings, which are well above the Fed's 2.0% inflation target and a signal not to expect a rate cut anytime soon.

The market reportedly took some solace in the recognition that core CPI was up "only" 2.8% year-over-year, yet there is still enough not to like in this report, which was filled with inflationary readings. The Services index, for instance, was up 0.6% month-over-month and 3.4% year-over-year.

The offset to that glass-half-full mentality is that the market hasn't seen the last of pass-through inflation pressures from the Iran war, which isn't a very hot war now, so to speak, but which has continued to put a near freeze on traffic through the Strait of Hormuz.

That is a point that will continue to occupy time in the back of the market's mind, but at the forefront is the behavior of the semiconductor stocks, AI stocks, and mega-cap stocks. Where they go, the market cap-weighted indices seem destined to follow. The added point of interest, though, is whether that weakness is infectious to the rest of the market or if the rest of the market gets a rotational booster shot.

--Patrick J. O'Hare, Briefing.com