Markets are surging today, driven by the latest developments in US-Iran talks to reopen the Strait of Hormuz. Oil prices have retreated significantly, with Brent trading at a $103 handle/bbl, and the 5-year yield dipping below 5.2%. In the meantime, momentum is on track to extend its 9-day winning streak, with the GSPRHIMO and Early Cycle Reflation indices leading the charge. However, some sectors are showing signs of weakness, such as software vs semis and bitcoin sensitive indices, which are lagging behind.

In the tech space, GOOG is outperforming META, with a 40bps spread between the two stocks. This could be a sign that investors are starting to anticipate competition from Google and OpenAI in the coming weeks. Meanwhile, semiconductor names like AKAM are seeing gains after announcing an AI computing deal with Anthropic, while the broader space is catching a bid with GSTMTSEM up 2.7%.

Looking ahead to next week, there are several AI-related catalysts to keep an eye on, including OpenAI Dev Day on September 29 and MU earnings on September 30. While equities have been resilient in the face of higher rates, we are starting to see some cracks in the credit space, particularly among hyperscaler CDS, which is trading 2-4bps wider than unchanged QQQs. This could lead to increased issuance from these names in the coming weeks, driving wider spreads.

In terms of technical indicators, ETFs as a percentage of the tape are elevated at 32%, while the 20dma of 27% is holding steady. Retail participation is also trending lower, with only 8% of SPX volume traded by retail.

Overall, our flows indicate that we are currently a 3 out of 10 in terms of overall activity levels, with franchise flows skewed 1% better to buy. LOs are skewed 1.7% better for sale, with supply in macro products, energy, and industrials seeing the most interest. HFs are slightly skewed.