Ruled by Headlines

Each day seems to deliver some new development in the Middle East, and at this point no one really knows where matters will stand by the end of the session. Iran reopened the Strait of Hormuz on Friday, helping fuel a burst of relief across markets, then it closed it again over the weekend after the U.S. said it had seized an Iranian-flagged cargo ship accused of trying to slip past the American blockade. Trump then renewed threats against Iranian infrastructure. Iran, in turn, said there were no plans for another round of negotiations with Washington, even as the White House pointed to talks in Pakistan and Vice President JD Vance prepared to arrive there. Tehran has not committed to attend. With so much uncertainty, it's no surprise that futures are in the red this morning.

For a few days, investors behaved as if the worst had passed. Stocks ran higher, with the S&P 500 and Nasdaq hitting fresh records again and again. The Nasdaq stretched its winning streak to 13 sessions and European markets joined the relief rally. TINA, the old Wall Street mantra - there is no alternative (to stocks) - came roaring back. But Donald Trump has, by now, trained both allies and markets to expect sudden reversals right when everyone thinks they understand the script. The result is a market ruled by headlines rather than conviction. 

Shipping through Hormuz stays restricted and fears of supply disruption have returned, as the cease-fire is set to expire Tuesday evening. U.S. energy names moved higher before the bell this morning, with Exxon Mobil, Chevron, and Occidental Petroleum all gaining ground. The dollar strengthened toward a one-week high. Treasury prices rose as investors looked for cover. The VIX - Wall Street's "fear gauge" - turned higher after falling for more than a week. Small caps, which had just hit a record, slipped. 

This week will force investors to confront the gap between hope and reality. The first test is economic data. U.S. retail sales for March arrive Tuesday. If consumers look weak, markets will revive the case for rate cuts. Then come the April purchasing managers' surveys on Thursday, which should give an early read on how much damage the latest uncertainty is doing to manufacturing and services. Friday brings the University of Michigan's final consumer sentiment survey for April, another window into whether Americans are genuinely starting to pull back. 

Then there is the Federal Reserve's succession drama: senators will hold a hearing Tuesday on the confirmation of Kevin Warsh as Fed chair. Warsh has argued for rate cuts, but some of the very people he would work with are skeptical. His nomination is already politically loaded, especially with the White House's pressure campaign against Jerome Powell still hanging over the process. One Republican senator has reportedly threatened to block Warsh unless the legal moves against Powell are dropped. In the odd scenario where that fight derails the transition, Powell could even remain in place on an interim basis: an outcome that would almost certainly delight markets less than it would enrage Trump. And because the Fed is now in its pre-meeting blackout period ahead of the April 28-29 meeting, officials will not be out in public smoothing nerves. So the market will be left alone with its thoughts.

At the same time, earnings season is picking up. Investors will hear from Lockheed Martin and RTX, which now sit at the uncomfortable intersection of defense demand and global instability. IBM and ServiceNow will also report, along with Tesla, which kicks off results from the so-called Magnificent Seven on Wednesday. Reuters data point to first-quarter earnings growth of 14.4% for S&P 500 companies, up from 13.7% a year ago. 

The market's attachment to technology stocks remains central to the bigger picture. Investors have piled back into AI-linked names, leaning again on the belief that the investment boom around artificial intelligence can overpower most other risks. That helps explain how valuations could cool while stock indexes still make records: earnings expectations have improved enough to do some of the work that wild multiple expansion had done before. But this remains a narrow bridge to build an entire market on.

In other corporate news, Marvell jumped after a report that Google may work with it on chips designed to run AI models more efficiently. Psychedelic drug developers surged after Trump signed an executive order speeding reviews and boosting federal research funding. TopBuild soared after QXO agreed to buy it in a $17 billion deal, while QXO fell. Eli Lilly slipped slightly as investors waited to see whether talks for Kelonia Therapeutics turn into an actual acquisition.

Today's economic highlights:

On today's agenda: the 1-year and 5-year Loan Prime Rates in China; the annual PPI in Germany; the year-to-date FDI in China; in Canada, the core inflation rate year-on-year, the monthly and yearly inflation rates, and the BoC Business Outlook Survey; finally, ECB President Christine Lagarde's speech in the Euro Area. See the full calendar here.

• Dollar index: 98.301
• Gold: $4,795
• Crude Oil (BRENT): $95.32 (WTI) 87.42
• United States 10 years: 4.27%
• BITCOIN: $75,054

In corporate news:

• Accenture, Avanade and Microsoft: The companies launched an industrial "agentic factory" AI system for manufacturers to reduce downtime and improve shop-floor decision-making.
• Blackstone's AirTrunk is acquiring Lumina CloudInfra to enter India and add about 600 megawatts of planned data-center capacity.
• Apple won after the U.S. ITC rejected Masimo's attempt to restore an import ban on certain Apple Watch models.
• AbbVie made a $10 million milestone payment to Nxera Pharma under their neurology collaboration.
• Tesla expanded its robotaxi service to Dallas and Houston as it pushes ahead with its U.S. autonomous ride-hailing rollout.
• Eli Lilly is nearing a deal worth more than $2 billion to acquire Kelonia Therapeutics and strengthen its cancer pipeline.
• QXO agreed to buy TopBuild for about $17 billion in its biggest acquisition yet.
• Blue Origin successfully landed a reusable New Glenn booster, but AST SpaceMobile's satellite was placed into the wrong orbit.
• Polymarket is reportedly seeking fresh funding at a roughly $15 billion valuation after Intercontinental Exchange's recent investment.
• Google is in talks with Marvell to design new AI chips dedicated to inference, according to The Information.
• Spirit Airlines is seeking government aid amid soaring oil prices, according to Air Current.
• Meta plans a first round of layoffs affecting 8,000 employees (10% of its workforce) on May 20.
• Eli Lilly is in advanced negotiations to acquire Kelonia Therapeutics for more than $2 billion.
• Philip Morris International announces that the FDA has renewed the marketing authorization for IQOS as a modified-risk tobacco product.
• Cerebras Systems, a rival of Nvidia, files for an initial public offering.

Analyst Recommendations:

• Doximity, Inc.: Truist Securities downgrades to hold from buy and reduces the target price from USD 37 to USD 29.
  
• Hess Midstream Lp: Goldman Sachs downgrades to sell from neutral and reduces the target price from USD 36 to USD 32.
  
• Okta, Inc.: Barclays upgrades to overweight from equalweight and raises the target price from USD 85 to USD 90.
  
• Westlake Corporation: Deutsche Bank downgrades to hold from buy and raises the target price from USD 115 to USD 120.
  
• Williams Companies, Inc.: Goldman Sachs upgrades to buy from neutral and raises the target price from USD 78 to USD 82.
  
• Bloom Energy Corporation: BMO Capital Markets maintains its market perform recommendation and raises the target price from USD 149 to USD 188.
  
• Ciena Corporation: Morgan Stanley maintains its equalwt recommendation and raises the target price from USD 286 to USD 405.
  
• Devon Energy Corporation: Wells Fargo maintains its overweight recommendation and raises the target price from USD 51 to USD 66.
  
• Flex Ltd.: Stifel maintains its buy recommendation and raises the target price from USD 75 to USD 95.
  
• Intel Corporation: Morgan Stanley maintains its equal weight recommendation and raises the target price from USD 41 to USD 56.
  
• Ttm Technologies, Inc.: Stifel maintains its buy recommendation and raises the target price from USD 108 to USD 135.
  
• Whirlpool Corporation: RBC Capital maintains its underperform recommendation and reduces the target price from USD 51 to USD 37.