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Briefing.com Summary:
*Oil prices are sinking on optimism that the U.S. and Iran might be able to strike an agreement to end the war.
*AI growth enthusiasm is in full swing following AMD's earnings report and other developments.
*The ADP Employment Change Report for April was a welcome precursor to Friday's employment report.
You know what happens when there is a confluence of sliding oil prices, falling Treasury yields, upbeat earnings news, and AI growth enthusiasm? Yep. You guessed it. The market goes risk-on and assumes the rally position.
Currently, the S&P 500 futures are up 53 points and are trading 0.8% above fair value, the Nasdaq 100 futures are up 314 points and are trading 1.1% above fair value, and the Dow Jones Industrial Average futures are up 404 points and are trading 0.8% above fair value.
New record highs will soon be established yet again, as buyers have been energized by an Axios report that the U.S. and Iran are as close as ever to a one-page, 14-point proposal for ending the war. An agreement, in turn, would open the Strait of Hormuz.
That tease has WTI crude futures 7.2% lower to $94.93/bbl and Brent crude futures 6.3% lower to $102.90/bbl. The 2-yr note yield is down seven basis points to 3.87%, and the 10-yr note yield is down seven basis points to 4.35%.
President Trump posted to Truth Social that Epic Fury will end if Iran "agrees to give what has been agreed to," but added that the bombing will resume and be more intense than before if it doesn't.
This is a road the market has been led down before, only to hit a negotiation roadblock every time. Every time, though, the market has successfully navigated a turnaround effort and has sped off to better territory, climbing what we might call the "wall of unworry."
Frankly, the stock market has not been all that worried since the end of March that the Iran situation will devolve into a worst-case scenario. It has been driven by a notion that "this, too, shall pass" and that a proper order of global economic growth will be restored.
Its resolve in that belief has been fortified by past experience with geopolitical conflicts and by the current stream of much better-than-expected earnings growth and an insatiable appetite for compute demand related to AI growth that is manifesting itself in massive capital expenditure plans.
Today is another snapshot in time, fortifying the stock market's bullish disposition.
- Advanced Micro Devices (AMD) is up 16% following its earnings report, which featured a 57% increase in data center sales and an acknowledgment that data center is now the primary driver of the company's revenue and earnings growth.
- Corning (GLW) and NVIDIA (NVDA) announced a long-term partnership to strengthen U.S. manufacturing for AI infrastructure that will include the construction of three new manufacturing facilities in North Carolina and Texas.
- The Information reports that Anthropic is aiming to spend $200 billion over the next five years for Google's (GOOG/GOOGL) cloud services and chips.
- CVS Health (CVS), Walt Disney (DIS), and Uber (UBER) exceeded consensus earnings estimates for the March quarter and offered reassuring outlooks.
For added measure, there was some good employment news reported this morning too. Private sector employment increased by 109,000 jobs in April (Briefing.com consensus: 79,000), according to ADP, with increases across all geographic regions and business sizes, although the increases were concentrated in small (65,000) and large (42,000) establishments.
The market will see the full array of labor market developments when the Employment Situation Report for April is released on Friday, but this latest development isn't going to stir a rate-cut bias at the Fed. The stock market has been good with that understanding for some time now, cognizant that it is a byproduct of economic activity and earnings growth that don't necessitate a rate cut.
