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Briefing.com Summary:

*Oil prices and bond yields are up as hostilities increase in the Middle East.

*Alphabet and Tesla are down sharply after their earnings results.

*Initial jobless claims hit their lowest level since 1969.

There is something interesting about this morning's trade in the equity futures market. That "thing" isn't the underperformance of the Nasdaq 100 futures. It is the recognition that the weakness in the Nasdaq 100 futures isn't even more acute.

Set aside for the moment the fact that WTI crude futures are back above $90.00/bbl and the 10-yr note yield is above 4.70%, and consider that every "Magnificent 7" stock is lower in pre-market action, led by Tesla (TSLA), down 7.8%, and Alphabet (GOOG/GOOGL), down 4.8%, following their earnings reports.

We're surprised, frankly, that there isn't more upset in the equity futures trade. Some mitigating factors include:

• The understanding that Alphabet raised its FY26 capex guidance to $195-205 billion from $180-190 billion, providing a nice tailwind for the AI infrastructure trade.
• The understanding that a lot of other companies also reported their June quarter earnings since yesterday's close, such as Lockheed Martin (LMT), Comcast (CMCSA), ServiceNow (NOW), and CSX Corp. (CSX), and are trading up nicely in pre-market action.
• The understanding that initial jobless claims for the week ending July 18 hit their lowest level (187,000) since 1969.

Currently, the S&P 500 futures are down 76 points and are trading 1.1% below fair value, the Nasdaq 100 futures are down 401 points and are trading 1.6% below fair value, and the Dow Jones Industrial Average futures are down 568 points and are trading 1.1% below fair value.

The major indices will open lower. That isn't surprising given what is going on with Alphabet, Tesla, and the mega-cap stocks, oil prices, and bond yields. The scope of losses at the index level, though, doesn't seem proportional to the gravity of the primary headlines.

The Houthis have claimed responsibility for attacks on two Saudi Arabian ships in the Red Sea, drawing the ire of President Trump, who said he will hold Iran responsible for these attacks and that "major military punishment" will now be inflicted on Iran and the Houthis in response.

There is a narrative that suggests the market still thinks this whole situation is going back to a state of calm soon, but the jump in the inflation-sensitive 10-yr note yield (up 27 bps this month) and oil prices (up 30% this month) makes it clear that market participants have not turned a blind eye to this geopolitical mess.

The ECB hasn't either. Today's policy meeting resulted in no change in the three key ECB interest rates, as expected, but the Governing Council said it is closely monitoring the oil shock and is committed to making sure inflation stabilizes at the ECB's 2% target in the medium term.

The probability of a rate hike by the FOMC at next week's meeting is on the rise, sitting at 37.9% today versus 11.8% a week ago. That's what escalating energy prices can do for a market.

The specter of a rate hike in the near future, likely at the September meeting per the CME's FedWatch Tool, is acting as a headwind for the equity market. It might be worse if the initial jobless claims—a leading indicator—weren't so good. They are a signpost of a labor market that continues to see low firing activity, which is a good sign for continued increases in consumer spending.

So, yes, the equity futures trade doesn't look comforting at the moment, but it is fair to say that, on a relative basis, things could look a lot worse. That might account for something during the cash session, but if oil and interest rates keep climbing, it will be a tougher climb for stocks.

--Patrick J. O'Hare, Briefing.com