Morning Dose #296: Cautious Bullish: Micron’s Surge vs. Fed Reality – Thursday 6/25/2026

Situation Awareness

Today’s Market Narrative

The primary narrative for June 25, 2026, is a dramatic pivot in sentiment fueled by Micron Technology’s (MU) blockbuster earnings report released after the bell yesterday. MU surged 17.9% to $1,235.38, beating EPS expectations by a staggering $4.28 and guiding Q4 revenues well above consensus. This performance has not only erased the prior session’s losses for the semiconductor sector but has reignited the “buy-the-dip” trade in AI-related hardware. The ripple effect was immediate, with overnight Asian markets seeing SK Hynix, Samsung, and Kioxia rally, and U.S. equity futures pointing to a massive open: Nasdaq 100 futures are up 618 points at 30,133, while S&P 500 futures are up 50 points.

However, this bullish enthusiasm is being tempered by a broader macro environment that remains fragile. The market is currently navigating a “hawkish pause” regime established by the Federal Reserve, where Chair Warsh has signaled that restrictive policy will persist longer than previously anticipated. With the median projection for 2026 rate cuts removed and inflation forecasts raised, the backdrop is not one of easy money but of disciplined capital allocation. This creates a bifurcated market where stocks with clear earnings growth and AI exposure (like MU and IBM) can decouple from the broader index, while names without such catalysts may struggle to follow the lead. The S&P 500 is down 1.9% week-to-date and the Nasdaq is down 3.9%, suggesting that while the immediate catalyst is strong, the trend remains under pressure until the PCE data clears.

Geopolitical tensions also play a subtle but critical role in today’s price action. While oil prices have retreated to $69.78 per barrel—down 0.56%—due to reports of increased traffic through the Strait of Hormuz and assurances from Iran, the IRGC has issued warnings that transit without approval is “unacceptable.” This delicate balance keeps energy volatility in check but prevents a full-scale relief rally in the energy sector. Meanwhile, the White House’s $88 billion funding request for the Iran war and farm aid faces an uphill battle in Congress, adding a layer of fiscal uncertainty. The market is essentially trading on a knife’s edge: the promise of AI-driven growth versus the reality of sticky inflation and geopolitical friction.

Macro & Policy

The Federal Reserve’s stance remains the dominant macro force, characterized by a “hawkish pause” that has reshaped market expectations for the remainder of 2026. Fed Chair Warsh’s recent communication has stripped away forward guidance, emphasizing a singular focus on price stability. The Summary of Economic Projections (SEP) now reflects a median rate of 3.8% for 2026, up from 3.4% previously, and has removed all expected rate cuts for the year. This shift has pushed the 2-year Treasury yield to 4.16% and the 10-year yield to 4.42%, both up 2 basis points overnight. The bond market is signaling that restrictive policy is here to stay, which acts as a ceiling for valuation-sensitive growth stocks unless their earnings growth can outpace the cost of capital.

Global central bank policies are also diverging, adding complexity to the currency and rate landscape. In Japan, the Bank of Japan is signaling a path toward normalization, with policymaker Tamura stating that rates need to be hiked every few months to reach a neutral rate of 2%. This has supported the Nikkei, which surged 4.6% to a fresh record high, while the USD/JPY sits at 161.88. Conversely, the European Central Bank remains cautious; policymaker Schnabel noted improvements but insisted more rate hikes are needed, supporting the Euro despite a slight dip to 1.1334. The U.S. Dollar Index is up 0.1% at 101.71, reflecting the relative strength of the U.S. economy despite the high-rate environment.

The critical macro event for today is the release of the May Personal Income and Spending report, specifically the PCE Price Index. The consensus expectation is a 0.4% monthly increase, matching April’s print, with Core PCE expected at 0.3%. Given the Fed‘s aggressive inflation projections in the SEP, any upside surprise in this data could trigger a sharp reversal in the equity rally, particularly in rate-sensitive sectors. The bond market is already pricing in a “bear flattener” dynamic, where short-term yields rise faster than long-term yields, a pattern that historically correlates with market volatility.

Economic Calendar Today

• 08:30 ET: Personal Income for May — Expected: 0.3% | Prior: 0.0% — Key indicator of consumer health; a strong print could support consumer discretionary stocks.
• 08:30 ET: Personal Spending for May — Expected: 0.3% | Prior: 0.5% — Critical for gauging demand; a slowdown could weigh on retail and services.
• 08:30 ET: PCE Prices for May — Expected: 0.4% | Prior: 0.4% — The Fed‘s preferred inflation gauge; a miss here could validate the “soft landing” narrative and boost equities.
• 08:30 ET: Core PCE Prices for May — Expected: 0.3% | Prior: 0.2% — The most watched metric; any deviation from consensus will likely drive immediate volatility in rates and equities.
• 08:30 ET: GDP – Third Estimate for Q1 — Expected: 1.6% | Prior: 1.6% — Final read on Q1 growth; confirms the pace of economic expansion.
• 08:30 ET: Durable Orders for May — Expected: -3.2% | Prior: 7.9% — High volatility expected; a sharp drop could signal a slowdown in business investment.
• 10:30 ET: EIA Natural Gas Inventories — Expected: NA | Prior: +73 bcf — Minor impact on energy sector volatility.
• 13:00 ET: $44 bln 7-yr Treasury note auction — Watch for bid-to-cover ratio as a signal of bond market demand.

Earnings & Corporate News

The earnings landscape is dominated by a massive beat from Micron (MU), which surged 17.9% to $1,235.38 after reporting Q4 EPS that exceeded expectations by $4.28. The company also beat on revenue and provided a Q4 guidance that sits above consensus, validating the AI memory demand thesis. This performance has triggered a sector-wide rally, with Qualcomm (QCOM) gapping up 11.8% to $217.75 after announcing a strategy to accelerate diversification into data centers, targeting over $15 billion in data center revenue by FY29. Additionally, IBM (IBM) jumped 4.4% to $268.75 following the unveiling of the world’s first sub-1 nanometer chip technology, a breakthrough that reinforces its position in the semiconductor value chain.

In contrast, several other companies faced headwinds. Barnes & Noble Education (BNED) gapped up 9.1% despite issuing downside FY26 revenue guidance, likely due to a short-covering rally or a specific buyout speculation. Conversely, Spry (SPRY) plunged 21.8% after providing commercial updates that failed to satisfy investors, while Trip.com Group (TCOM) fell 12.6% despite beating on revenue, missing by RMB0.32 on EPS. In the broader market, Acuity (AYI), Blackberry (BB), and Commercial Metals (CMC) all beat estimates, with AYI and CMC showing strong follow-through. Notably, Merck (MRK) and Gilead (GILD) received FDA approvals for new cancer treatments, providing a catalyst for the healthcare sector, while Eli Lilly (LLY) announced details on its Medicare GLP-1 Bridge program, further solidifying the weight-loss drug narrative.

M&A activity remains robust, with Bio-Techne (TECH) gapping up 21.4% after agreeing to be acquired by Merck KG&A for $73 per share in cash. This deal, along with the acquisition of Advanced Medical Solutions by H.B. Fuller (FUL), highlights the continued consolidation in the healthcare and industrial sectors. However, FUL itself is gapping down 7.1% despite the announcement, suggesting the market may be pricing in integration risks or the deal terms. The divergence between TECH and FUL underscores the importance of deal certainty and valuation in the current M&A environment.

WaveFinder Signal Summary

The WaveFinder scan environment is rich with opportunity, particularly in the continuation space, reflecting the post-earnings momentum in the semiconductor and AI sectors. There are 23 signals in the Continuation/2LYNCH scan, with top candidates including MELI (Retail), FTAI (Aerospace/Defense), and CLS (Electronics). These stocks are showing strong relative volume (RVOL) and price action above their moving averages, indicating that the “buy-the-dip” trade is extending beyond just the mega-cap names. The Reversal scan is also active with 8 signals, led by MCHP and AMD in the chip sector, suggesting that investors are looking to enter positions in names that have been oversold during the recent tech correction.

Breadth data shows a slight improvement, with 60.16% of stocks trading above their 40-day SMA, up 2.6 percentage points from the prior session. The 4% Bull/Bear gauge is nearly balanced at 340 bulls vs. 341 bears, indicating a market that is still in a state of flux but leaning toward a recovery. The 20-day SMA participation is at 59%, also up from 56%, confirming that the short-term trend is turning positive. However, the 9-month Bull/Bear count remains skewed toward the bears (29 bulls vs. 34 bears), suggesting that the long-term trend is still cautious. Traders should focus on the high-conviction continuation signals in the tech and industrial sectors while using the reversal signals as opportunistic entries in the broader market.

Today’s Watchlist

• MU — Micron: Post-earnings momentum play; gap up 17.9% to $1,235.38; watch for follow-through above $1,250.
• QCOM — Qualcomm: Data center diversification catalyst; gapping up 11.8% to $217.75; key level at $220.
• IBM — IBM: Sub-1nm chip breakthrough; gapping up 4.4% to $268.75; technical breakout above $270.
• MELI — MercadoLibre: Continuation signal (2LYNCH); trading at $1,659.57 with 4.8% gain; strong retail momentum.
• FTAI — FTAI: Aerospace/Defense continuation; trading at $272.14 with 3.8% gain; geopolitical tailwinds.
• MCHP — Microchip: Reversal candidate; trading at $92.48; potential bounce from oversold conditions in the chip sector.

Action Codes of the Day

2LYNCH — The Continuation scan is active with 23 signals, led by MU and QCOM, confirming that the post-earnings momentum in semiconductors is a sustained trend rather than a one-day event.
BTFD — With the Nasdaq futures up 618 points and the PCE data pending, the “Buy The Dip” strategy is valid for high-quality names like IBM and MELI that have shown resilience despite the broader market’s weekly decline.