April 23rd Pre-Market

Good Morning

Yesterday was all records and good vibes. Today we got ships seized in the Strait, oil back above $100, and Musk asking us to believe he'll turn $25 billion into robots and robotaxis. Honestly, after the run we've had, I'll take a little red today.

The market is reacting less and less to the war and the focus is coming back to the big theme, AI, and whether it's actually showing up in revenue for these companies. IBM's answer today was no.

Let's dig in…

Today's Big Picture

1. Higher Oil Is Becoming A Consumer Story 

Iran grabbed two more ships overnight. Brent is above $100 for a fourth session and pump prices are over $4. CNBC's survey this morning puts numbers on what everyone already feels. 4 in 5 Americans have cut spending because of gas. 6 in 10 have cut entertainment. 4 in 10 are cutting groceries and medical care. Energy Secretary Wright said Sunday don't expect sub-$3 gas until next year.

Everyone's long energy. The trade nobody's talking about is short consumer discretionary. Darden and the cruise lines report in the next two weeks and they're about to walk into a buzzsaw.

2. Tesla Wants To Be A Hyperscaler Without An AWS 

Musk tripled capex to $25 billion for robotaxis, Optimus, and AI. The stock flipped from up after earnings to down once that number hit the tape. Google, Microsoft, and Amazon can spend like that because cloud and search print billions in recurring cash every quarter. Tesla has no cash engine. The core auto business just had its second worst sales quarter since 2022 because Chinese EVs are eating them alive. You're not buying a car company anymore. You're buying Elon's promise that robots pay off in 2027. MSFT and ADBE are red in sympathy because the AI overinvestment debate is back.

3. IBM Is The First Public Scalp For Enterprise AI 

IBM down before the bell. Software growth slowed and guidance stayed flat. The Street is pinning it on Anthropic's enterprise tools eating into the consulting book, which was supposed to be IBM's moat. Accenture, Cognizant, and Infosys all report in the next two weeks. If any of them echo what IBM said on the call, the whole IT services sector re-rates and the "AI is disrupting the incumbents" trade finally has a body.

Market Overview

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Stock Spotlight (pre-market)

Southwest Airlines $LUV ( ▼ 2.24% )  
Down after missing on revenue and flagging full-year profit risk from jet fuel. First airline to quantify the Iran oil hit. Forces every travel name with fuel exposure into damage control on their next call.

ServiceNow $NOW ( ▼ 14.9% )  
Down double digits despite beating top and bottom. Management blamed delayed Middle East government deals for a 75 basis point subscription headwind. Portfolio managers now have to decide if the Iran drag is NOW-specific or leaking into every enterprise software name.

Texas Instruments $TXN ( ▲ 16.58% )  
The lone green semi this morning. Q2 revenue guide of $5 to $5.4 billion crushed the $4.86 billion consensus on analog chip and data center demand. Analog peers (Analog Devices, Microchip, NXP) now carry higher bars into their own prints next week.

Honeywell $HON ( ▼ 2.26% )  
Down 6 after guiding Q2 below the Street. Management explicitly blamed the Iran war for the miss, the first company this cycle to do so. Every industrial reporting the rest of April (GE, Emerson, Rockwell) now has cover to guide down using the same excuse.

Netflix $NFLX ( ▲ 0.39% )  
Up after authorizing another $25 billion buyback on top of the $6.8 billion still left under the old one. Same dollar figure as Tesla's new capex plan, opposite direction. Forces a clean question for capital allocators: is your company returning cash or burning it on moonshots.

Cannabis Basket $MSOS ( ▼ 4.89% )  
Trump admin reclassified marijuana as a less dangerous drug this morning. Curaleaf, Tilray, Green Thumb, and Trulieve all sharply higher pre-market. This unlocks banking and interstate commerce in ways the sector has been priced against for a decade.

What to Watch

2-Year Yield (All Day) 
Oil above $100 for four straight days changes the Fed math. June rate cut odds are already getting repriced. If the 2-year pushes past 4.6, the soft-landing trade is finished.

Intel Earnings (After Close) 
Texas Instruments just set the semis bar with strong analog and data center demand. Intel has to match with AI accelerator or foundry commentary or the semi divergence widens into Friday. Bar is on the floor.

The Next Industrial To Blame the War
Honeywell was the first to explicitly cite the war for a guide down. If one more industrial names it today (GE, Emerson, and Union Pacific all report), Q2 estimates break down across the sector and cyclicals underperform into next week.

- John

Today’s Sponsor

How Intrepid hit record profits without dropping its principles

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Read how they did it