S&P 500: Tech Stocks Surge as Apple-Intel Chip Deal Shifts Supply Chain

Oil Pullback Gives Stocks Room to Breathe After Monday’s Selloff

U.S. stocks are higher Tuesday and the S&P 500 is pushing toward the record high at 7272.52. June WTI crude oil dropped roughly 3% to just above $102 a barrel and Spot Brent crude slipped about 2% to near $111 after U.S. officials confirmed commercial vessels are moving through the Strait of Hormuz. That was enough to take the inflation pressure off equities and give the bulls a session. The Nasdaq climbed 1.01% to a new intraday high. The Dow added around 250 points.

Main Driver: Oil Pulled Back and Stocks Got Room

Monday was ugly. Iran launched drones and missiles at the United Arab Emirates, oil spiked and stocks sold off. Tuesday the script flipped. U.S. officials said commercial vessels are moving through the Strait of Hormuz and crude came off hard. I’ve watched this relationship play out all week. When oil runs, equities feel it immediately through inflation fears and margin pressure. When oil pulls back, equities get the same relief just as fast. That is the market we are trading right now and oil is still the variable that matters most.

Earnings Kept the Bulls Engaged

Pfizer beat on earnings and revenue and kept its full-year outlook intact. The stock moved slightly higher. Anheuser-Busch InBev was the stronger mover, jumping about 8% on results that pointed to steady demand. Companies keep coming in ahead of expectations and that is giving investors a reason to stay focused on fundamentals even when geopolitics is creating noise.

Stocks in the News

Intel surged 14% and hit a new all-time high after a report that Apple is in talks with Intel and Samsung to manufacture chips in the United States. If confirmed that is a major shift in Apple’s supply chain away from Taiwan Semiconductor. Intel has more than doubled since April on artificial intelligence demand and expanding partnerships.

Palantir Technologies slipped around 3% despite strong growth and raised guidance. Revenue grew at its fastest pace since the company went public but expectations were already priced in and investors used the strength to take profits.

Technical Outlook

The S&P 500 Index (SPX) is higher early Tuesday, putting it in a position to challenge the record high at 7272.52. Taking out this level will signal a resumption of the uptrend.

One thing I’ve noticed about this market recently. Despite the uptrend, the price action has been compressing. This could be a sign that some investors are selling the rallies and booking profits. The first minor range is 7272.52 to 7174.12. Its pivot at 7223.32 is support. The second minor range is 7107.86 to 7272.52. Its pivot is at 7190.19. The third minor range is 7046.55 to 7272.52. Since the pivots are rising, I can confirm the uptrend, but if they start failing, then consider it a sign of a shift in momentum.

While the pivots are important levels to watch for early detection of a shift in momentum, an even better indicator will be the failure of swing bottoms at 7174.12, 7107.86 and 7046.55. We haven’t seen a swing bottom fail since March 26. With that kind of time between moves like that, the next one could prove to be significant.

Another sign pointing toward a loss in momentum is the crossing to the weak side of the trend line from the 6790.02 bottom. During the early part of the rally, the SPX was moving higher at a rate of about 32 points per day. As of Monday, the rate had dropped to 26 points per day. This is another indicator to keep an eye on.

The next trend line is at approximately 7143.00. We’ll be watching trader reaction to this indicator as we move forward with the uptrend.

What to Watch

The record high at 7272.52 on the S&P 500 is the level that tells me whether aggressive buyers are back in control. Take it out with conviction and the uptrend resumes. Stall here and the compressing price action I’ve been watching becomes the story.

The pivots at 7223.32 and 7190.19 are the support levels to watch on any pullback. Oil headlines and earnings are going to keep driving sentiment. The market has shown it can handle uncertainty as long as crude stays under control and companies keep delivering. Both conditions held Tuesday. Neither is guaranteed going into Wednesday.

More Information in our Economic Calendar.