MARKET UPDATE: Price action so far with sharp tech weakness seen while precious metals slide and oil chops to geopolitics

Today's price action appears to reflect multiple themes rather than a single macro driver, resulting in some unusual cross-asset moves:

Stocks

[AI] The weakness in equities has been concentrated in the technology sector rather than reflecting a broad-based risk-off move. The renewed pressure today could be a factor of the earlier Bloomberg report that highlighted Crusoe, a data centre developer, has paused its development activities on its Wyoming site. This could be adding to recent AI valuation fears, particularly in wake of the Broadcom (AVGO) earnings report last week which led to sharp declines in tech on Thursday and Friday. Similar to Thursday and Friday, Tech is the clear underperforming sector, while defensive sectors like Real Estate, Consumer Staples, Utilities and Health Care are rising. 

[Positioning] Meanwhile, Citi wrote in a note that elevated positioning continues to drive risk, highlighting how bullish Nasdaq positioning remains extended, leaving the overall setup improved but still vulnerable to downside risks. 

Oil

Meanwhile, the overall downside in crude prices appears largely driven by growing optimism surrounding US-Iran negotiations. Reports suggest a draft agreement has been sent to the US side for review, while other reports indicate efforts are underway to reach a memorandum of understanding as soon as this week. President Trump also struck an optimistic tone, stating that a breakthrough could be achieved within two weeks. However, a recent post from Trump said the US will respond to the Iranian attacks on US apache helicopters over the Strait of Hormuz, seeing crude pare some of the earlier losses, while stocks extended lower. 

Precious metals

Over recent months, gold and equities often moved in the same direction as easing geopolitical tensions reduced inflation concerns and supported expectations for Fed easing. However, Friday's stronger-than-expected nonfarm payrolls report has altered that dynamic. Markets now fully price a 25bp Fed rate hike by year-end, reflecting a labour market that appears stable alongside inflation that remains above target. Recent FOMC developments have also leaned increasingly hawkish, with several policymakers pushing to remove the easing bias from the policy statement and a growing number of officials acknowledging that rate hikes may become necessary if inflation persists. Wednesday's CPI report will be key and could help further shape expectations for the Fed. A hot report may see others opt to vote to remove the easing bias, with Fed's Waller has already alluding pre-blackout that he will be joining the regional Fed presidents in voting to remove it. 

T-notes 

However, the hawkish Fed narrative does not sync up with the price action in Treasuries with yields lower across the curve. Today's decline may reflect a combination of lower energy prices reducing inflation concerns, some defensive demand following the sharp selloff in technology shares, and positioning ahead of this week's CPI report and Treasury supply.