August 4th Pre-Market Brief

Good Morning

Big earnings morning. Caterpillar just printed its first quarter above $20 billion, Palantir nearly doubled its revenue, and SpaceX reports tonight for the first time as a public company.

Then Bessent went on TV and said a Hormuz deal could land today, which took four percent off crude in about a minute. Busy market for a summer Tuesday.

Let's dig in...

Today's Big Picture

1. Oil Moved Before Anyone Signed Anything
Bessent said a deal could come today or tomorrow, with free movement and no tolls. The Journal reports the working plan sends ships in through Iranian waters and out through Omani waters, no fees. Crude fell under $78 on the comments alone. Bessent also said hundreds of ships are stuck in the Gulf, and prices fall again when those get out.

2. The Inflation Scare Is Really An Oil Scare
The 10-year was at 4.70 and rising before Bessent spoke. It sits near 4.65 now. Last week the Dow lost 1,100 points on fear the Fed is behind on inflation, and long yields hit a 19-year high. One sentence about a waterway took some of that back, which tells you what the fear was actually about.

3. Beating Isn't Enough If You're Spending
Spotify added seven million premium subscribers, crossed 300 million, and hit a record gross margin. The stock is lower because operating costs rose 19 percent on cloud and AI features. DigitalOcean beat, raised guidance, and grew committed future revenue twelvefold. It is down harder than Spotify.

Market Overview

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Stock Spotlight (pre-market)

Caterpillar $CAT ( ▲ 1.87% )  
Higher on $8.17 adjusted against $6.20 expected. First quarter above $20 billion in sales in company history, driven by data center power demand. Tariff costs now guided to the low end of the prior range.

Palantir $PLTR ( ▲ 2.11% )  
Higher after revenue rose 93 percent to $1.94 billion. U.S. commercial, the line the bear case was built on, rose 149 percent. Citi lifted its target to $245 from $200. Stock came into the print down 29 percent for the year.

Pfizer $PFE ( ▲ 0.08% )  
Higher on 77 cents and $15.03 billion, both ahead. Eliquis did $2.43 billion against $2.08 billion expected. The drug carrying the quarter is the one going generic.

Wayfair $W ( ▲ 5.19% )  
Lower on a beat. Orders, customers, cash flow and U.S. sales all cleared estimates. Average order value came in at $332 against $337.57. More buyers, smaller carts.

McDonald's $MCD ( ▼ 2.0% )  
Higher on $3.38 adjusted, revenue light. U.S. same-store sales grew 0.8 percent and domestic traffic fell. Skye Anderson takes over the U.S. business today and owns that number.

BP $BP ( ▼ 2.12% )  
Flat on a large beat. Underlying profit more than doubled to $5.73 billion on refining margins and trading. The profit came from a closed strait that Bessent says may open today.

What to Watch

Upcoming IPO’s?
MarketBeat did an excellent job on this free IPO guide on IPO’s happening this year.

The Yen Trade Runs Through Oil
Macquarie lists what would force the short yen position to cover. Cheaper crude is first, ahead of a Bank of Japan hike in September and any softening of Takaichi's fiscal plans. A Hormuz deal delivers the first one today. Japan's 10 year is near 2.85 percent against a 1 percent overnight rate, a gap JPMorgan says is wide enough to pull Japanese life insurers home, and that money stops buying Treasuries when it goes.

AMD Earnings (After The Close)
Advanced Micro Devices reports tonight into the most damaged group in the market. Chip linked leveraged ETF assets are down 55 percent from the June peak, so there is far less left to force out on a miss. Guidance decides whether semiconductor weight rebuilds toward 20 percent or settles at 16.

- John

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