A positive start to the week, driven by geopolitics over earnings and economic data. President Trump said over the weekend he prefers a diplomatic solution. Around 8:30 Eastern a headline said Iran's Supreme Leader granted government authority for talks. Crude oil, already lower, dropped 6.8% and traded below $98, down from over $100. The 10-year yield traded at 4.91%, well off its highs above 5.3%. E-Minis rose half a percent and the NASDAQ about 0.8% pre-market.
Lower oil matters because energy affects every company that reports, and firms keep citing higher fuel prices. The two big concerns are inflation and oil. If oil falls, that story loses force. Below $98 feels better than $100-plus, and even a $2 move carries a psychological weight.
Oil supply and demand
There are no real supply issues. The world is flush with crude oil. Prices stay high because of disruptions moving oil from place to place. If tension eases, crude could fall a lot, but there are no guarantees - something usually disrupts it. As of Monday morning, the headlines from the Trump administration and Iran leadership point to deescalation, the key word for the day.
Earnings week
146 S&P 500 companies report this week, plus 24 in the NASDAQ. Apple (AAPL) and Palantir (PLTR) report today after the close, AMD (AMD) tomorrow after the bell, and Qualcomm (QCOM) Wednesday. Palantir's valuation is always a story. Apple has rallied to historically high PE ratios near 40, so it is not cheap and the bar is high for both. Today looks like a strong session, but news after the bell will drive these stocks.
Other names to watch this week across different industries: GLOB (fintech), Uber (UBER) and Lyft (LYFT) on ride sharing, McDonald's (MCD), Under Armour (UAA), Snap Inc. (SNAP), and Airbnb (ABNB).
Midterm elections
The midterms are nearly over. The market prefers gridlock. If Democrats win the House and Republicans keep the Senate, that is gridlock, and markets usually outperform because not much gets done either way. A one-sided result adds risk - talk of investigations, impeachment, and government stalling. Gridlock is bullish for the markets.
Fed and other news
Fed speeches this week from Goolsbee, Hammack, Musalem, and Michelle Bowman.
Marvell Technology (MRVL) agreed to buy optical component maker Lumentum Holdings (LITE) in a $115 billion all-stock deal. Lumentum holders get 4.5 Marvell shares per Lumentum share, an implied value of about $232 per share, roughly a 23.9% premium over Lumentum's unaffected close. Both names traded lower pre-market.
The Washington Post reported SpaceX is considering buying EchoStar's Boost Mobile or using its network. SpaceX did not comment. The idea makes sense, but buying is an old-fashioned way to enter the industry, and Elon Musk does not usually work that way, so it sounds far-fetched. SpaceX was already up pre-market. SpaceX's move into mobile was a big deal; how it fits together is still unclear. Crown Castle (CCI) moved higher on the news. SpaceX swung from 140 up to 165, then back down to 136 - a reminder that these names make big moves, so investors must be careful.
Large-cap tech sold off over the past week. Information technology, communication services, and consumer discretionary were all heavy, while the equal-weight S&P held up well. To start today, large-cap tech could be one of the leaders.
Oracle (ORCL) traded down about $4 to $5 after offering more debt - new securities and a bond raise. Many hyperscalers are raising capital this way.
Non-farm payrolls come Friday.
