The market is an extension of the last few days: an inverse link between crude oil prices and stocks. The 10-year Treasury yield trades higher at 4.735%, crude is up, and stocks are heavy. No good news comes from US-Iran tensions - only harsh words going back and forth. Crude climbs on that, and stocks have lost their upward push. E-mini futures are off their lows but still down about 7/16 of a percent.
This is a global story. German Bund yields are soaring too. It reflects US spending and the Iran tensions. A memorandum of understanding has expired with nothing to show for it.
We do not know what we do not know about US-Iran. Both sides are pressuring each other. President Trump said back channels and negotiations continue, with Pakistan and Oman working to lower tensions. Nothing is announced on the surface, but something close or imminent could shift the tone at any time. Right now the tone means higher crude, higher yields; the dollar was higher this morning but is now near unchanged. Geopolitical risk stays high. Investors should be ready for a tone change. The US does not want oil prices here - it wants a deal with Iran and does not want boots on the ground or more bombing. Iran must also negotiate in good faith. Watch the headlines for any shift.
Strait of Hormuz and Yields
Overnight a cargo vessel was struck by a projectile, and the Strait of Hormuz is now effectively shut. That pushes oil higher. Over the weekend 28 ships went through; now more violence there lifts oil. The 30-year yield rose to 5.33%, the highest since 2002. The 10-year hit as high as 4.74%, the highest since 2007. Yields are at multi-decade highs both at home and globally.
Home Depot (HD)
Home Depot (HD) surprised on earnings. Net earnings rose to $4.8 billion, or $4.92 a share versus $4.73 expected. Revenue was $47.86 billion versus $47.24 billion expected. The bar was extremely low, but the numbers are positive given a rough housing market. HD is a strong proxy for housing - even with high rates and housing under pressure, this well-managed company is doing well. It has locked down the professional contractor through new acquisitions and steps to streamline its business, and that shows in the numbers. HD traded up a little over $7 pre-market, above $345. The implied volatility pointed to an expected move of about $11, so the move is a bit below that. It was a nice beat on a low bar.
HD was tepid on larger projects. This may be a precursor to Lowe's (LOW) earnings. HD remains the preferred place for professionals, less so Lowe's (LOW). Small projects and do-it-yourselfers did well - people will do those. Large renovations cost a lot, so people are holding back on them.
Housing Starts and Permits
Housing starts and permits give a read on housing now and in the future. Starts, measured when a home's foundation is laid, missed at 1.239 million, down from 1.142 million last month and below the 1.34 million consensus. That is the bad part. Permits, the paperwork for future housing, beat at 1.443 million versus 1.36 million last month and 1.37 million expected. So a miss on starts, a beat on permits - the future looks a little better, the present a little sloppy.
Later coverage will look at ITB, the home construction index that includes these names. Toll Brothers (TOL) reports after the bell today, and Home Depot (HD) is also in that group.
Meta (META) Child-Safety Trial
Arguments in the Meta (META) trial start today and could run six to eight weeks - at least six weeks. It is in Northern California with a Northern California judge, close to Meta's (META) home. Attorneys general from several states, including New Jersey and California, are bringing it. They claim Meta (META) platforms Facebook and Instagram are addictive to younger children and that Meta (META) promotes that addiction. The platforms use features like algorithm feeds and infinite scroll to hook kids, contributing to anxiety, depression, and sleep disruption. Today's social media is like television was for earlier generations - some people spend far too much time on it, though it is unclear whether that is Meta's (META) fault. The outcome is uncertain.
A few weeks ago there was a payment due in New Mexico over $500 million, and before that another of $300 million. A guest yesterday raised concerns about this kind of legal risk for Meta (META) in the big picture.
