Chips Down, Defense Up, CPI 3.8, eli terminal Tuesday May 12

April headline came in 3.8% YoY, above consensus 3.7. Memory dumped. Defense caught the bid that ten weeks of war had failed to produce.

SNDK 1,452.02 −6.2% · WDC 488.74 −5.3% · MU 766.58 −3.6% · AMD 448.29 −2.3% · LMT 521.00 +1.7% · NOC 558.30 +1.8% · USO 144.30 +1.7%

The print

April CPI printed 3.8% year-over-year headline, above the 3.7% Bloomberg consensus and well above the Cleveland Fed nowcast of 3.56%. Core CPI rose to 2.8% from 2.6%. Month-over-month headline was 0.6%, matching consensus; core MoM came in 0.4%, above consensus 0.3%.

The energy index added 3.8% on the month, accounting for over 40% of the all-items increase. The April Brent peak of $114 ran through retail FIFO inventory accounting and hit the print exactly as the passthrough thesis described.

The reversal

SNDK closed at $1,452.02, down 6.2% on the day. WDC at $488.74, down 5.3%. MU at $766.58, down 3.6%. AMD at $448.29, down 2.3%. The names that ran 60-90% over the past month gave back their Monday gains in one session.

Equipment trimmed in sympathy. AMAT closed at $431.20, down 2.8%. KLAC at $1,811.35, down 1.8%. LRCX at $289.24, down 2.3%.

Hyperscalers split. ORCL closed at $186.83, down 3.6%. MSFT at $407.77, down 1.8%. AMZN at $265.82, down 2.5%. META at $603.00, up 0.7%, the only major hyperscaler with a green tape.

Defense finally moved

LMT closed at $521.00, up 1.7%. NOC at $558.30, up 1.8%. The names that had been dumped through ten weeks of war finally caught a bid on the day a hot inflation print pushed yields higher.

Biotech recovered. IBB closed at $172.28, up 1.4%. XBI at $134.91, flat. The long-duration names that should benefit from any growth scare finally found relative bid.

Banks dropped. KRE closed at $68.23, down 2.3%. The regional bank tape continued to bleed.

Energy and metals

WTI futures closed at $101.00, up 6.5% over the 5-day window. Brent at $106.51, up 6.4%. RBOB gasoline up 5.7%. Silver futures up 6.8% over 5 days with SLV closing at $78.55. Copper futures closed at $6.63, up 8.2% over 5 days. Gold roughly flat.

Physical Mars Gulf Coast sat at $121.51 on a current tick, up 2.6%. The grade premium over WTI widened to $20.51 even as front-month futures pulled back slightly on the day.

Iran repriced lower

Polymarket repriced Iran probabilities lower. US-Iran peace by June 30 dropped from 40% Monday to 34% Tuesday. Iran regime fall by May 31 sits at 1%. Iran airspace closed by May 31 at 38%. The market absorbed Trump's rejection as the new regime, not a temporary stance.

The bond move

TLT closed at $84.99, down 1.3% over 5 days. The 10-year broke above its recent range on the CPI confirmation. UUP at $27.45, up 0.4% over 5 days. The dollar firmed on the rate move. The bond positioning that Monday's tape had hinted at (TLT down 0.3% on the day) confirmed Tuesday.

Powell DOJ probe plus Warsh succession plus 3.8% headline plus 2.8% core combine as a tough setup for the rate-cut path. The Cleveland Fed nowcast missed by 24bp to the upside; the market repriced higher-for-longer in a single session.

What's next

PPI Wednesday at 8:30 AM ET. Retail Sales and Jobless Claims Thursday. AMAT reports Thursday after close. The equipment print is now the next test of whether the supplier extension has another leg after Tuesday's dump.

Today reversed yesterday. The chips that ran on Iran being priced gave it all back when CPI confirmed hot. Defense moved for the first time in ten weeks of war, not on the war but on the rate path it implies. The FIFO passthrough delivered as expected. The bond market broke the range. AMAT Thursday tells you whether the equipment extension survives the rate move.