Oil and the Inflation Test
Satellite images overnight suggest the East-West pipeline inside Saudi Arabia was hit, reported by Reuters. Neither Saudi Arabia nor Saudi Aramco has confirmed it. This would be a big deal - that pipeline moves about 7 million barrels per day, so a strike could badly disrupt oil markets.
Oil is falling anyway. One reason: a rumor that Gulf Cooperation Council (GCC) countries could meet Iranian foreign ministers next week to ease tensions. It is only a rumor, but energy markets are reacting to it. Crude oil rose about 8% to 8.5% this week.
CPI is the next test. Focus on core inflation month over month. The Cleveland Fed expects 0.2%. That may not be enough to shift the Fed, since the three-month moving average for core CPI sits near 0.2% month over month. Yields keep moving higher. The market already looks priced for a hot CPI print and is bracing for hotter inflation over the next couple of months.
Market Setup
The S&P 500 is still consolidating. It pierced the 50-day moving average the prior day; the question is whether it recovers into the weekend. There was a pullback nearly every day this week, so a relief rally is possible. Technology and communication services stocks kept catching decent bids on an individual basis even while the broader market was red. Seasonality helps too: September 11 is historically one of the more bullish days of the year for the S&P.
Oracle (ORCL)
Shares up about 5% in the session after beating on both top and bottom lines. Revenue was $19.3 billion for the quarter versus a Street estimate of $19.14 billion - roughly a 30% year-over-year rise. Cloud revenue slightly beat expectations.
The big headline mover was free cash flow at negative $5.4 billion. That is still a loss, but far better than the Street's estimate of about negative $9.56 billion. Oracle changed strategy to seek more prepayments on the deals it signs, then uses those prepayments to run the business instead of drawing on cash or bond reserves. The software side of the business came in a little light, but guidance was fairly strong.
On fears that capex spending keeps reaccelerating, the CFO says there are no plans for that now. If it happens, the impact would land in fiscal year 2028 for some newer clients - a positive for the market.
Adobe (ADBE)
Shares down about 4.5% in pre-market trading despite beating expectations, which keeps happening to this stock. Q3 revenue was $6.76 billion, above the Street. Adjusted earnings per share came in at $6.13 versus a Street estimate near $6.00.
The main worry is Q4 revenue guidance, which came in slightly light. Adobe guides $6.8 billion to $6.85 billion, roughly matching the Street. The concern is lost market share to competitors, both paid rivals and premium AI offers. A bright spot: AI-first annual recurring revenue (ARR) grew 150% year over year. The core issue is monetization - whether Adobe can keep current customers, add new ones, and push prices higher to drive revenue. The Street stays doubtful. Leadership shakeups add volatility. This drop is less severe than past ones, and the chart still shows a higher low, but there is little optimism about near-term fundamental wins.
S&P 500 Levels
Wide range implied. To the upside, 7,700 is the top call-side contract. To the downside, 7,525 based on open interest and this morning's volume. On a sharp pullback, the 7,590 puts are the second-highest traded contract and hold some support, with decent premium. The market is implying more than a 1% move in either direction.
