Market status: Cautious optimism, chips strengthening, oil climbing, and two rare data points in focus

Trading review: ongoing reports, trends, indices, stock prices, bonds, foreign exchange, commodities, and analyst recommendations. 06:50. Cautious optimism is recorded this morning in the markets in light of the uncertainty surrounding the agreement between the USA and Iran and good reports from two AI stocks on Wall Street. Meanwhile, the price of oil is rising by 0.5% to $89.5, completing six consecutive days of gains, the longest winning streak since April.

Asia

A mixed trend is recorded in Asia: KOSPI in South Korea is jumping by about 5%, Nikkei in Japan is unchanged, Hang Seng in Hong Kong is down by 1%, and the Shanghai index in China is slightly down. A positive early signal for the chip sector on Wall Street: the two from South Korea, SK hynix and Samsung Electronics, are jumping this morning, following the strong reports from CoreWeave and the optimistic forecast from Super Micro; both surged sharply in after-hours trading on Wall Street.

Wall Street

Wall Street closed yesterday with declines, led by technology stocks, after hopes for the reopening of the Strait of Hormuz faded and doubts increased regarding the possibility that the USA and Iran would reach an agreement. The S&P 500 fell by 0.3%, the Nasdaq lost 0.6%, and the Dow Jones was unchanged. Futures in New York are trading this morning with a slight rise of up to 0.2%. Volatility may be recorded ahead of the publication of the Consumer Price Index, which will be released this afternoon before the opening of trading. The expectation is for a moderation in price pressures, which in turn may reduce the pressure on the Fed to raise interest rates.

Tel Aviv

After the excellent report from Bank Hapoalim yesterday, this morning we are waiting for the report from Bank Leumi. Dual-listed stocks will not have much influence this morning; most of them are without a significant arbitrage gap. Two of them will balance each other out: Tower will fall by about 3% at the opening, Camtek will rise by a similar rate. Nayax, which lost about 25% in the last two days, will open with a rise of over 3%. Yesterday, slight declines were recorded after a volatile day. The TA-35 index moved to a slight rise towards the close, while the TA-90 index continued the negative trend. The banking index stood out with a rise of 2.5%, whereas the insurance index fell by 2%; a particularly sharp decline was also recorded in the defense stocks index. The declines in the index were led by Elbit stock, despite it publishing excellent reports. A similar scenario repeated itself with Turpaz stock, which also reacted with a sharp decline after publishing a report that exceeded expectations.

Currency Market

The shekel is quite stable this morning and is trading at about 3 shekels to one dollar. The effect of the joint intervention of Japan and the USA in the foreign exchange market is fading, and the yen is weakening again and approaching 160 yen to the dollar — a level considered a threshold at which authorities in Japan may consider further intervention. One of the reasons for the weakness of the yen is the continued activity of Carry Trade transactions. According to Derek Halpenny from MUFG Bank, the trend may continue as long as stock markets show resilience and volatility in the markets remains low.

Something else worth knowing

Wall Street is expensive today like in the dot-com bubble — but there is a difference. The S&P 500 index is currently trading at a Shiller P/E of about 42. The last time the index was at these levels was at the peak of the technology bubble in 2000, just before the market began a collapse of about 50%. But according to FactSet, in the current reporting season, the profits of S&P 500 companies are growing at a rate of about 50% compared to the parallel quarter. The fastest pace since the second quarter of 2021. About 86% of the companies that have already published reports beat profit forecasts, an unusually high earnings surprise.