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Briefing.com Summary:
*Caterpillar is ready to lead the Dow further into record territory.
*Oil prices continue to sink on prospects of a peace deal and reopening of the Strait of Hormuz.
*Semiconductor stocks are in a command position that will lead the market higher at today's open.
Well, here we are. The Dow Jones Industrial Average closed yesterday at a record high, and the S&P 500 just might make a run at doing the same today.
Currently, the S&P 500 futures are up 27 points and are trading 0.1% above fair value, the Nasdaq 100 futures are up 310 points and are trading 0.7% above fair value, and the Dow Jones Industrial Average futures are up 656 points and are trading 1.1% above fair value.
Amazon (AMZN) and Microsoft (MSFT) were among the Dow's rocket boosters yesterday. Today, it will be Caterpillar (CAT), which is up 11% in pre-market trading after posting some blowout Q2 earnings results. Merck (MRK) and McDonald's (MCD) also topped Q2 estimates. They will provide some lift as well, but their strength won't be as instrumental as they are both up about 0.7% ahead of the open.
Elsewhere, the semiconductor stocks are back in a command position. The VanEck Semiconductor ETF (SMH) is up 3.3%. Good things tend to happen for the market—and certainly the Nasdaq—when these stocks have a tailwind behind them.
It is a function of renewed optimism about the AI trade and, frankly, a return of the momentum trade.
There is also some momentum working in the oil market, only it is downside momentum, which is the good kind. WTI crude futures are down 3.5% to $77.55/bbl, with Treasury Secretary Bessent telling CNBC that there is a chance a deal might be struck with Iran to reopen the Strait of Hormuz today or tomorrow. In the same vein, there are reports out of Qatar that a potential peace deal between the U.S. and Iran has been drafted.
It isn't entirely clear if Iran is "on the same page" with these reports, yet the oil market looks to be turning the page on things, which is what matters most at the moment for the stock and bond markets.
The 2-yr note yield is down four basis points to 4.21%, and the 10-yr note yield is down three basis points to 4.66%.
Those moves came in front of the 8:30 a.m. ET release of the June Trade Balance report, which showed a familiar-looking deficit.
For June, the trade deficit narrowed to $73.3 billion (Briefing.com consensus: -$73.0 billion) from $77.6 billion in May. Both exports and imports declined month-over-month, but the narrowing deficit was the result of imports (-$7.3 billion) declining more than exports (-$2.9 billion).
The key takeaway from the report is that, while the real goods deficit narrowed to $94.5 billion in June from $99.8 billion in May, the Q2 average is still 18% greater than the Q1 average, so it will be factored as a drag on Q2 GDP.
