Vital Dawn Podcast for Tuesday July 28

Welcome to the VitalDom podcast for Tuesday, July 28th. US equity futures are mixed so far this morning. S&P futures are down modestly about 6 points or 8 basis points. Dow futures are up about 105 points. That's 20 basis points. Russell futures are essentially unchanged. And the NASDAQ futures are down 190 points, which is about 70 basis points. In Europe, the major indices are up about 30 basis points. you're seeing outperformance in european autos industrial staples media retail software services and telecoms and then you're seeing underperformance in utilities energy healthcare ships and chemicals and then turning to asia the price action was very mixed the nikai slumped about four percent the hang saying ticked up 40 basis points your head comp fell about 1.1 percent taiwan slumped 4.7% and Korea tumbled 11%. You had massive declines in a lot of ship stocks. Samsung fell 13.5%. SK Hynix fell 14.7%. So I didn't necessarily see any specific piece of news since the close yesterday that kind of dramatically shifts the narrative. I think you kind of have a bunch of themes though. There's still very much unfolding. So on the geopolitical front, more signs of hope and optimism about diplomatic process so oil is down again this morning you know you have Brent that is approaching the level so that obviously well off the high last week dollar plus You know another night of no airstrikes So you know this has now been the starting Friday night when the U S kind of unilaterally suspended the airstrike process and Iran did the same, that, that unofficial ceasefire is still in place. A lot of articles about how Iran is talking with Oman and Saudi Arabia about striking some type of an agreement to reopen Hormuz. Um, so that is still unfolding. That's positive. You're seeing treasury yields kind of dip a little bit, um, three to four basis points. There's definitely a lot of talk about why treasury yields are not down more given the move in oil. Um, you know, I think there's a variety of reasons for, for why that's taking place. You know, one of which is there still is a lot of uncertainty around what's going to happen in the Middle East, but you also have upward inflation pressure in the US in the form of tariffs in the form of the AI boom. Um, you know, you also have signs of, of tightening labor market dynamics and you have, um, you know, just kind of, you have a fed that is not providing a lot of guidance, which I think that is creating some anxiety too, as to how, um, how markets should be looking at the reaction function under the, under the new kind of washless wash led fed. Um, so for all those reasons, treasury yield are not falling as much as you would expect given what's happening with oil on the fed tomorrow, the market, you know, you're still looking at about 35% odds of a rate hike, which is unusually high this close to a meeting You know I personally think at this point in time if they were to hike rates tomorrow and kind of send a message that this will probably be it I think that would actually be the best case scenario versus leaving rates unchanged which they probably do and then kind of have another press conference like they did last time that's very vague, coupled with hawkish comments about vowing to bring inflation back down to target and just not really providing a whole lot of incremental clarity as to how they're looking at the current situation. So that's oil in the Fed. With regards to tech, this process of chip socks and your pick and shovel names coming for sale, it's been underway now for several weeks. You really kind of go back to the Micron report. That's sort of marked the peak approximately for the socks, and it's really been in a downward trend since then. And there are a whole host of reasons for why this is happening. You can have a list of 20 plus reasons. I think the single most important one, though, really gets back to questions about the sustainability of the CapEx boom. No one questions that spending at the present time, CapEx right now, is off the charts. That was the case from companies last week that are levered to it. We heard more last night from companies levered to CapEx spending. We're probably going to hear a lot more throughout this week. You're going to see CapEx budgets go up. The big issue though is whether given that CapEx is swamping operating cash flow, companies are being forced to go to the markets to pay for all this So whether it debt whether it equity whether it some convoluted financial arrangement And in the current climate that is going to become a lot harder in which case then if capital markets are not going to provide the cash, then inevitably CapEx spending is going to have to suffer at some point going forward. And I think that's kind of the real question, the real debate right now is the sustainability of the current boom, given that you're seeing so many pressure points emerge in capital markets. So that is pretty much everything. Like I said, there wasn't a single headline that's really shifting the narrative. There was a lot of news. There were a lot of earnings out as well. So take a look at the full piece for all the details. None of them are kind of shifting the overall conversation though. For today's calendar, the focus will primarily be on earnings. So before they open, the major U.S. names, Boeing, Carrier, Corning, Coca-Cola, PayPal, Royal Caribbean, UPS. After the close, Ford, Clack, Mondelez, NXPI, SK Hynix, Seagate, Skyworks, Terodyne, Visa. We're also going to get, after the European close today, so in the middle of the U.S. session, ASM International, which is an important semiconductor company, along with Kering. and then Trump will be meeting with both Netanyahu and Zelensky at the White House today. And that is pretty much everything for today, Tuesday, July 28th. Thank you everyone for listening.