(Yahoo! Finance) - 👋 Good morning! Wednesday’s oil price reprieve was short-lived. Prices for Brent (BZ=F) and WTI (CL=F) were hovering just under $100 per barrel on Thursday as the conflict in the Middle East widened, bringing the stock market down.
On the agenda this morning:
🛢️ Making sense of 'the largest supply disruption' in history
🚨 Wall Street contemplates a long-term conflict
🛒 Costco customer sues for tariff payback
🐭 Disney+ gets into the short-form video game
🤖 AI's 'weird' advantage
📆 What we're watching Thursday: On Thursday, the S&P 500 (^GSPC) closed 1.5% down, the Dow (^DJI) 1.6%, and the Nasdaq (^IXIC) 1.8%.
Besides oil and Iran, investors will be watching for another piece of inflation data as the Personal Consumption Expenditures inflation index for January is set for release at 8:30 a.m. ET. While the oil crisis may have made the numbers out of date, there may still be insights to mine.
On the labor market side, the Job Openings and Labor Turnover Survey for January and the University of Michigan sentiment index will hopefully provide a look into the labor market and consumer side of the economy.
📰 What's on our radar
🔻 Tapping the strategic oil reserve means the lowest reserves since the 1980s. We saw a bigger draw during the start of the Ukraine/Russia war, but the 40% drop will take the level to around 240 million barrels.
🇺🇸 US trade deficit dropped by 25% in January, a win for Trump. Though tariff revenue cratered after the Supreme Court ruling, US exports for industrial supplies like gold, pharma, and IT products offset decreases in consumer goods.
📈 Why the real market shock is in long bonds. While the stock market is a convenient barometer for sentiment, the bond market once again may be the key place for insights.
🧨 The AI-driven ‘kill chain’ transforming how the US wages war. Palantir and Claude are helping the Pentagon identify targets with reasoning, not just summaries. And oversight is becoming a concern in this new paradigm.
🎨 Adobe stock sinks after its CEO announces departure as the company tries to figure out whether AI will help it win or disrupt its business.
👀 The Trump admin is pursuing a bunch of new tariffs. In the wake of the Supreme Court striking down the sweeping levies, two new investigations probing 60 countries' trade practices may find grounds for fresh tariffs.
🏡 The Senate just passed its first major housing bill since the subprime crisis. But the bipartisan bill (89-10) has some obstacles to overcome, such as a strong investor lobby against it. Meanwhile, the war in Iran clouds the mortgage outlook.
📦 Amazon raises drone safety concerns as it quits a trade group. Amazon wants requirements around anti-collision measures it uses for its Prime Air delivery project that the trade group opposes.
🤖 The stock market's turmoil has nearly put Big Tech into a correction. Nvidia, Apple, and Tesla are almost 10% off their October highs. Something to watch as these companies still power the stock market.
🛢️ Making sense of 'the largest supply disruption' in history
Another day has passed, and the all-important Strait of Hormuz is no closer to being open, as the International Energy Agency (IEA) called the current situation the “largest supply disruption in history.”
With Iran’s new Supreme Leader doubling down on the country’s Thou Shalt Not Pass strategy and multiple tankers getting attacked Wednesday and Thursday, progress toward at least the oil aspect’s conclusion has stalled.
Announcements of a 400-million-barrel strategic release have not stopped prices from climbing into the high $90s once again. Meanwhile, Wall Street is constantly moving its price targets for oil, gaming out the length of disruption and price.
A few highlights: Macquarie estimates a "few weeks of Hormuz closure" could push crude to $150 or higher. Bloomberg said a three-month closure could see $160. Iran's Islamic Revolutionary Guard Corps (IRGC) itself says "expect oil at $200 per barrel."
🚨 Wall Street contemplates a long-term conflict
The Overton window seems to be slowly widening to the concept of a more drastic US-led assault on Iran. At the very least, military and financial analysts are now having to game it out.
Thursday’s oil surge and stock market fall reflected the souring mood on Wall Street and signaled investors' dimming prospects of swift resolution.
Still, a short war is priced in. But should it be? Answering that to the negative would certainly stress markets and represent a downside that investors are closely monitoring.
Some analysts say that dislodging Iran’s control of the vital shipping lane may require a US-led ground assault should diplomacy (or the Navy and insurance escort system) fail.
Again, an escalation to boots on the ground, and the risks of much higher American casualties, is not a scenario the market embraces. But it’s one that some observers are taking as a possibility as Iran’s strategy of squeezing the global economy and battering its US-allied neighbors makes it harder to stay confident in a short war thesis.
Ironically, a rapid deescalation, hasty withdrawal, and declaration of victory also carries its own risks.
While this might appease the market panic by leading to a reopening of the waterway, it may also cripple relations with Gulf Arab states, which enjoy a symbiotic relationship with the US.
🛒 Costco customer sues for tariff payback
The Supreme Court’s ruling against the Trump administration’s wide-ranging tariffs opened the door for the companies to claw that money back.
But a Costco customer posed a logical follow-up: What about me?
A plaintiff seeking nationwide class-action status sued Costco earlier this week in an attempt to get the wholesaler to pass on to members whatever refund it may get from the government.
Costco is among more than 2000 companies suing the administration to get a tariff refund. The argument from the plaintiff’s perspective is that, if Costco gets its money back, it would be unfairly receiving a double payment — first from the upcharge in higher prices it collected from customers, and again from the refund.
As Costco CEO Ron Vachris said last week, it’s not clear if his company or any others will actually get their refunds, or when potential refunds might arrive. But if Costco does recover the duties it paid, he said, the money would go to lowering prices and improving the business.
Instead of this hypothetical future benefit, the plaintiff would rather get a check.
🐭 Disney+ gets into the short-form video game
When you think of short-form video, lifestyle influencers and absurd comedy sketches might come to mind.
But as unsettling as it might sound, Hollywood is experimenting with turning vertical video content into the next TV. If Instagram Reels and TikTok are attracting so many audiences, why not get into that space?
The failed Quibi project that lost $1.75 billion might have some reasons.
Disney+ has begun to roll out its new short-form video feed to US users, called Verts. Crucially, the clips aren’t actually originals (yet), but rather scenes and big moments from Disney+ content.
But the significance of Verts is that even the most iconic brand in entertainment is realizing that short-form video is where their customers’ eyes and attention are glued.
And similar to Disney’s new partnership with OpenAI, Verts represents another way to get people into the Disney merch machine. Watch enough clips of Avatar on Verts, and you might just decide to fire up Disney+ and commit to a rewatch of the movies. (Can the massacred youth attention span handle a three-hour movie?)
Or, perhaps more likely, book an Orlando vacation or buy the action figures for your kids. On and on the content flywheel spins.
Most straightforwardly, implanting a native, Disney-content version of TikTok inside of Disney+ will be a powerful way to boost watchtime and engagement on the streaming platform.
🗣️ Quote of the day
"Geopolitical risk also weighs on hiring and investment in ways that extend beyond the effects of higher oil prices and tighter financial conditions."
— Goldman Sachs' US economics team, in a note to clients
An important reminder that oil prices are merely one piece of the current geopolitical puzzle.
⚡️ Vroom vroom from car corner
Automaker Rivian just unveiled its new R2, an EV squarely aimed at the US’s bestselling EV, the Tesla Model Y.
It starts at $45,000 in its most affordable trim. But it won't be available until 2027.
Automaker Rivian just unveiled its new R2, an EV squarely aimed at the US’s bestselling EV, the Tesla Model Y.
It starts at $45,000 in its most affordable trim. But it won't be available until 2027.
🗓️ Earnings and economic calendar
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Economic data: PCE price index, month-on-month, January (+0.3% expected, +0.4% previously); PCE price index, year-on-year, January (+2.9% expected, +2.9% previously); Core PCE price index, month-on-month, January (+0.4% expected, +0.4% previously); Core PCE price index, year-on-year, January (+3.1% expected, +3% previously); Personal income, January (+0.5% expected, +0.3% previously); Personal spending, January (+0.3% expected, +0.4% previously); Durable goods orders, January preliminary reading (+0.4% expected, -1.4% previously); GDP annualized, quarter-on-quarter, Q4 (1.4% expected, 1.4% previously); JOLTS job openings rate, January (+3.9% previously); JOLTS quits rate, January (+2% previously); JOLTS layoffs rate, January (+1.1% previously); University of Michigan sentiment, March preliminary reading (56.3 expected, 56.6 previously); U. Mich. current conditions, March preliminary reading (56.6 previously); U. Mich. expectations, March preliminary reading (56.6 previously); U. Mich. 1-year inflation, March preliminary reading (+3.4% previously); U. Mich. 5-10 year inflation, March preliminary reading (+3.3% previously)
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Earnings calendar: VEON Ltd. (VEON), RLX Technology Inc. (RLX)
By Hamza Shaban and Ethan Wolff-Mann
