U.S. Indexes closed lower on Monday, with the NASDAQ 100 the clear underperformer as Technology led the broader market lower. The weakness in Tech was driven by sharp losses in memory names (DRAM -c. 9%) and semiconductor stocks (SOXX -5%) amid concerns surrounding SK Hynix’s upcoming earnings. The stock also gave back some of Friday’s gains following SK Hynix’s US listing. Broader risk sentiment was also weighed down by ongoing geopolitical tensions between the US and Iran after further military strikes over the weekend. President Trump announced that the US would reinstate the blockade on Iran and assume control of the Strait of Hormuz, adding that the US would impose a 20% charge on cargo vessels transiting the Strait in exchange for safe passage. The developments pushed crude prices higher throughout the session, with benchmarks settling near their highs after the US military confirmed the blockade on Iran would take effect from Tuesday. Meanwhile, retaliatory strikes between Saudi Arabia and Yemen were seen, adding to concerns that the conflict could broaden across the region. Fed commentary also influenced markets after Governor Waller struck a hawkish tone. He said another firm core inflation reading in Tuesday’s CPI report would force the Fed to consider a near-term rate hike, adding he would view such an outcome as a genuine signal rather than noise. Conversely, a softer reading would not be sufficient on its own, with Waller saying he would need to see several months of cooler inflation before becoming confident that price pressures were moving back towards target. The combination of higher oil prices and Waller’s hawkish comments pushed Treasury yields higher across the curve, with the front end yields leading as markets increased expectations for additional Fed tightening. In FX, the Dollar outperformed as higher Treasury yields and safe-haven demand supported the Greenback. The Canadian Dollar also gained on the back of stronger oil prices, while the traditional low-yielding currencies, the Japanese Yen and Swiss Franc, lagged. Attention now turns to Tuesday’s CPI report and Chair Warsh’s testimony before the House. Markets will be particularly focused on the core inflation reading following Waller’s comments, while investors will also be listening for any indication of how Warsh interprets the latest inflation data, although he is expected to continue avoiding explicit forward guidance. Elsewhere, Oil closed higher by a whopping 9% while Gold ended Monday’s session with a 3% loss.
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