The Morning Market Briefing

Andrew, Ben, and Tom discuss the industrial demand train continuing to roll with ISM Manufacturing accelerating to 55.6 and employment turning positive for the first time in 33 months, Caterpillar raising guidance and surging 10% on data center engine and turbine demand, Palantir soaring 15% with US commercial revenue up 149% and Karp declaring the "revolution for AI sovereignty" is underway, ON Semi up 8% on silicon carbide AI data center revenue growing 60%, Entegris beating estimates, TransDigm +3% on double-digit aerospace and defense growth, Cummins raising outlook on data center power gen, healthcare beats from MRK and PFE potentially masking channel stuffing, McDonald's +2% on better-than-feared comps with a new US president appointed, ADM +5% on the EPA biofuel mandate, and Snap +6% on the World Cup boost.

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Ben and Tom discuss the rare coordinated currency intervention with the US joining Japan and possibly Korea to prop up the yen from 164 to 155, Japan spending at least $53 billion with the US chipping in over $1 billion — reportedly by selling euros rather than dollars in a strategic move to pressure Eurozone policy while supporting Japan, Bessent's incentive to keep Japan from dumping US Treasuries, Japan's plan to tap a COVID-era $60B/day USD swap facility, Iran signaling that Hormuz talks with Oman are entering the final stages after MBS urged Trump to prioritize dialogue, and the market reaction with oil down 5% to the high-$70s/low-$80s, the 10-year at 4.68%, and stocks up 0.5%.

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Ben and Andrew discuss a plan for Hamas to disarm in Gaza, Apple and Amazon's earnings reports, and the blowup of the AI focused hedge fund Situational Awarness. 

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Andrew, Ben, and Tom discuss Warsh holding rates at 3.50-3.75% in a divided 6-3 vote with market-implied inflation expectations dropping meaningfully since the last meeting, the BOE also holding at 3.75% in a matching 6-3 split, the emerging Mag-7 split with Microsoft rising 8% on improved AI ROI, better throughput, and Copilot seat growth versus Meta down 9% on longer time-to-value and fuzzy CapEx guidance beyond 2027, the broader takeaway that Mag-7 is now focused on driving AI revenue and CapEx efficiency which is bearish for Nvidia near-term but long-term positive for the industry, a Russian missile leaving a 30-foot crater on the Poland-Ukraine border, Admiral Cooper preparing a 10-14 day punishing air campaign against Iran, and South Korea weighing a short-selling ban.

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Andrew, Ben, and Tom discuss today's Fed meeting with a 35% chance of a rate hike and expectations of a hawkish hold from Warsh amid potential mutiny from Waller, Bostic, and Lisa Cook, the emerging "semi-stagflation" theme with memory prices destroying demand and slamming chip stocks including Vertiv down 14%, Skyworks and Qorvo down double digits, and KLA down 8%, Procter & Gamble's remarkable flatline quarter with 0% volume, 0% pricing, and 0% organic growth, the strong and resilient consumer theme from Visa and Garmin, disruption stories like CoStar losing search traffic to AI, Trump vowing to hit Iran hard after intercepted attacks sending oil up 5%, and Zuckerberg's WSJ op-ed calling for democratized AI access.


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Ben and Tom discuss the growing Fed infighting reported by WSJ's Nick Timiraos with Governor Chris Waller openly challenging new Fed Chair Kevin Warsh at a dinner over his five new outside expert task forces on communications, inflation framework, asset holdings, data, and AI's impact on productivity, Warsh's notable silence on economic shocks despite the changed environment, the AIA Architecture Billings Index staying below 50 for 41 straight months in one of the longest downturns on record, oil falling as Iran hosts a diplomatic call with Saudi Arabia and Oman with WTI down to $80, chips getting smashed again on Korea weakness and China competition, and Trump's packed schedule meeting Zelensky and Netanyahu before Lindsey Graham's funeral.

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Andrew, Ben, and Tom discuss Nvidia agreeing to guarantee $250 billion in financing for OpenAI's $500 billion 10GW data center in southern Ohio developed by SoftBank Energy with Japan investing $33 billion in the natural gas power plant and the US government splitting power revenues, CXMT's 450% China market debut and Apple's interest in sourcing memory chips from them to avoid hostage-taking by SK Hynix, Samsung, and Micron, "TACO Monday" as Trump paused Iran strikes over the weekend to give diplomacy space amid concerns over Patriot interceptor stockpiles, and the market impact with oil down 7% to the mid-$80s, stocks up across the board, gold rising on Fed dovish odds, and a 33% chance of a rate hike this Wednesday.


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Ben discusses SLB rising 5% after beating on broad-based international drilling activity with its Data Center Solutions business on track to exceed $1 billion annualized run rate this year and $2 billion by end of 2027, Intel's after-hours pop fading as CapEx ballooned to over $20 billion for 2026 with 2027 significantly higher despite strong Client and Data Center results, Tenet Healthcare soaring 16% on a massive EPS guidance raise from Medicaid supplemental payments in TX and CA, HCA falling 3% on payer mix headwinds from ACA coverage losses, and NextEra reiterating all guidance through 2035 as power demand accelerates.


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Andrew, Ben, and Tom discuss the Houthis targeting Saudi tankers Encelia and Layla in the Red Sea with Trump vowing to destroy a bridge or power plant for every Strait attack, a mixed AI earnings print with ServiceNow up 6% cementing itself as the AI control tower while Google fell 4% on heavy cloud spend without ad acceleration and TPU revenue pushed to 2027, STMicroelectronics dropping 14% on a big margin miss, strong railroad growth from CSX raising numbers with FCF up over 80%, Norfolk Southern posting solid revenue growth, the 30-year yield nearing 5.2%, the ECB holding rates at 2.25% while warning on energy inflation, Uber cutting 10% of customer service jobs, and Bessent moving to oust Fed Vice Chair Barr over SVB.

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Andrew, Ben, and Tom discuss the widening Iran war with the US expanding airstrikes to a military site near Tabriz, Iran activating air defenses in Tehran and firing on US bases in Kuwait, Bahrain, and Jordan, the complete breakdown of diplomacy and early talk of ground forces, the landmark 30-year deal approving uranium enrichment in Saudi Arabia for civilian nuclear power with US companies playing a central role, and oil prices ripping 4% with Brent into the mid $90s and WTI into the high $80s.


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