'Fast Money' traders talk markets closing in on new highs

Key Concepts:

• Semiconductor sector (SMH, SOX) performance
• Earnings season impact and market expectations
• US-China trade talks and export controls
• Capital expenditure (CapEx) trends
• Market broadening and participation
• Volatility Index (VIX)
• Leading economic indicators
• "Would you rather" stock comparison (Qualcomm vs. Nvidia)

Semiconductor Sector Performance and Market Context:

• The semiconductor sector (SMH) has seen a significant rebound, up 250% since its Thursday debut.
• The SMH is approaching its all-time high from the previous year (around April 2nd, 283), raising the possibility of an "epic double top."
• The SOX (Semiconductor Index) has doubled the performance of the S&P 500 since the lows of April 7th but is still down approximately 12%.
• The market's current optimism is fueled by hope, particularly regarding a potential deal with China, which could greatly benefit the chip sector.
• The VIX (Volatility Index) is below 17, indicating a shift from a more volatile market environment.

Earnings Season and Market Expectations:

• Q1 earnings season saw companies meeting expectations, which were set relatively low.
• The performance of Megacap tech and semiconductor companies was a key focus during earnings season.
• Despite uncertainty, capital expenditure (CapEx) remained intact, defying expectations of a pullback.

US-China Trade Talks and Export Controls:

• Optimism surrounding US-China trade talks is a significant driver for the semiconductor sector.
• Easing of export controls could lead to further investment in the sector, driving a "catch-up trade."

Market Broadening and Participation:

• Recent performance of laggard stocks (e.g., GM, Ford, Lennar, FedEx, UPS, Schlumberger, Exxon) suggests a potential broadening of market participation.
• These stocks have had a positive day but are still far from their previous highs.

Taiwan Semiconductor (TSMC):

• Taiwan Semiconductor (TSMC) reported better-than-expected May sales.
• Analysts are puzzled by potential "double ordering" in light of existing uncertainties.

Leading Economic Indicator:

• Semiconductors are often viewed as a leading indicator of the economy.
• The current strength in the semiconductor sector may or may not reflect the overall health of the economy.

"Would You Rather" Stock Comparison:

• A "would you rather" game is played, comparing Qualcomm and Nvidia at current levels.
• Nvidia is "mired" around the 143 level.

Conclusion:

The semiconductor sector is experiencing a strong rebound driven by optimism surrounding US-China trade talks and resilient capital expenditure. While the sector's performance may indicate broader market strength, its connection to the overall economy remains debated. The potential for a "catch-up trade" and the ongoing US-China negotiations are key factors to watch.