Stocks pulled back early with yields climbing. The prior session saw pressure but prices came off the lows, with positive rotation back into mega cap names near the close.
Middle East Risk and Energy
Several news headlines hit overnight. The Houthis struck two Saudi airports, an escalation from past attacks. President Trump said he is not looking for a deal with Iran at the moment. A Russian refinery, a petrochemical plant, was hit. Vessels keep getting hit in the Strait of Hormuz and near the Bab-el-Mandeb. This pushed energy prices higher and lifted yields on rising inflation risk.
On the charts, the E-mini S&P 500 is testing the 20-period moving average, a key support level. Holding it keeps the trend of higher highs and higher lows intact, which matters at least for today.
WTI crude faded over the past two weeks but hit key support. An upward trending line from the late-June lows shows higher lows forming an ascending channel. Crude also hit the 50-day moving average and the anchored volume-weighted average price from February, the start of this conflict. These lines together give some reason for buying beyond the news. A bounce targets the 20-day moving average (shown in blue) around $94.25. Above that, the next tests are $100, then the $105 level seen about a month ago. Earlier in the week the WTI watch level was around $90.
Oil and rates had disconnected, with oil falling while rates stayed high or rose. Now they are recorrelating into a positive link between yields and energy prices, which equity investors do not want to see.
The NASDAQ and S&P 500 ($SPX) are at or near all-time highs, but the Russell could drop into correction territory, 10% off its highs. The broad market has not repaired itself. Strength sits in the tech trade, and energy will drive sectors more tied to interest rates.
Applied Digital (APLD) Earnings
A strong report. The market expected a big adjusted loss per share. The company beat on revenue, which came in at $341.9 million for the quarter against expectations near $124.5 million, a roughly 322% year-over-year increase. Formerly a crypto name, it is repurposing into data centers and AI and starting to make money. Services revenue rose 225% year over year. The tenant fit-out services business brought in about $157.2 million in revenue. Demand is picking up, mostly in the north where it holds the bulk of its data centers. This trend is a tailwind for firms like CoreWeave (CRWV) that build and host data centers. The company still needs a positive adjusted EPS, and cash burn continues, but topline revenue growth supports more optimism for a name beaten up over the past year.
PepsiCo (PEP) Earnings
Consumer patterns stay weak, especially in North America. The company said more cost cuts could improve margins over time, lifting shares about $2 from the prior close. Core EPS came in at $2.34 against an expected $2.30. Revenue was $25.27 billion versus $24.96 billion expected, about 5.6% year-over-year growth. Organic revenue accelerated, a positive, but driven by international sales, not North America. The company cut its core EPS guidance and narrowed organic revenue guidance to around 3% growth, a slight improvement over the prior quarter's outlook. It plans more cost cuts to lift margins. It cut prices on many products but did not get the matching rise in U.S. volume, a concern. This raises questions about peers like Coca-Cola (KO) and General Mills (GIS) facing the same margin squeeze. Weak numbers, but the cost-cutting commentary explains the share bump.
Demand is shifting with consumer tastes. Some consumers are trading down, while GLP-1 drugs change appetites. Gains showed in products like Doritos protein and brands with additives stripped out. In beverages, low-sugar and zero-sugar Gatorade are doing better. Worth watching how far the company leans into this and how long American appetites sustain it.
Wolfspeed (WOLF) Pentagon Deal
A big move this morning, far different from July 2025. Wolfspeed designs and makes silicon carbide, needed to produce chips that work in high-voltage settings with power efficiency. It cited a roughly $1.5 billion long-term deal with the U.S. Department of War's Office of Strategic Capital to ramp silicon carbide production powering defense technologies. The aim is to cut dependence on China for these resources. The deal includes Wolfspeed issuing warrants to the Department of War of up to 7.5% of diluted equity. Shares moved higher. The government is boosting domestic production to reduce reliance on countries like China that hold critical minerals and metals needed for semiconductors in defense systems.
S&P 500 Levels
To the upside, 7,800 holds the majority of call flows. To the downside, the 7750 puts see the most volume, but watch the 7720 level, where most of the gamma exposure sits this morning on the volume front. Despite a pullback of over 6% to 7% for S&P 500 futures, volatility stays below 16. That disconnect signals mega cap names are still holding up the market. If that continues, expect more intraday rotations from the broadening-out move seen earlier this week toward technology-specific sectors outperforming.
