Morning Report | Oil-led inflation bid lifts yields, AI rerates
$AVGO guidance disappoints; AI multiples compress $ARM valuation pressure; data-center permits tighten $USO crude holds $96–$98; Gulf risk premia $TLT yields reverse higher; duration hit
Market Pulse
AI
4 events
AI equities face renewed valuation pressure as Broadcom guidance disappoints and local governments tighten permitting for data centers and fabrication projects.
Last 24 hours
Broadcom posted fiscal Q2 revenue about $22.2bn and guided Q3 to ~$29.4bn, while keeping 2026 and 2027 AI semiconductor targets unchanged despite AI revenue doubling to ~$10.8bn.
SoftBank shares fell ~11.3% to ~7,377 yen amid a broader tech sell-off, with attention on ~16.3 trillion yen stand-alone debt and a $40bn bridge loan tied to further OpenAI funding.
Grimes County, Texas voted 4–1 to grant SpaceX a 100% property-tax abatement and reinvestment zone for a proposed ~$55bn semiconductor ‘Terafab’ project claiming ~1,800 jobs, despite residents raising litigation and environmental concerns.
Seattle approved a one-year moratorium on new large AI data centers after proposals for five facilities, adding timing risk for urban power-heavy builds as 14 states consider pause-or-ban legislation and 2025 project delays were estimated at $156bn.
Market reaction
Broadcom was indicated about -14% pre-market after earnings; SoftBank fell ~11.3% in the cited session, alongside referenced declines in Nvidia (-3.62%), Amazon (-2.5%), and Alphabet (-0.79%).
Our view
AI-linked equities stay choppy as investors reprice near-term upside and execution timelines, with leadership requiring clearer demand visibility and fewer permitting choke points. Next watch is whether Broadcom revisits multi-year AI targets and whether moratoria like Seattle’s spread or are narrowed in implementation.
What could change our view
Broadcom lifts 2026–2027 AI targets, reigniting semiconductor upside momentum.
Moratoria broaden across major hubs, materially delaying hyperscaler data-center buildouts.
Tickers: $AVGO, $ARM, $TSLA, $AMZN
Middle East War
3 events
Gulf escalation headlines keep crude near $96–$98 while a fragile Israel-Lebanon ceasefire framework and a U.S. war-powers vote add political noise.
Last 24 hours
Kuwait said Iran struck Kuwait International Airport, killing 1; CENTCOM reported intercepting multiple Iranian missiles and drones, then conducting self-defense strikes on Qeshm Island with no U.S. personnel harmed.
Israel, Lebanon and the U.S. announced a ceasefire framework tied to Hezbollah withdrawing from South Litani and LAF control in pilot zones, but Israeli drone strikes and continued troop presence signaled fragility.
The U.S. House passed an Iran War Powers resolution 215–208 to restrict hostilities without authorization; it faces expected veto risk and requires further Senate steps despite a similar measure advancing in May.
Market reaction
Oil reflected a persistent risk premium: WTI settled up more than 2% at $96.02 and Brent up about 2% at $97.81, then eased to roughly $95.49 WTI and $96.20 Brent.
Our view
A sustained geopolitical premium with crude staying elevated and headline-driven, as offsetting de-escalation signals remain unproven. The next inflection is whether Gulf attacks broaden or shipping/infrastructure is threatened, versus credible enforcement of the Israel-Lebanon framework and clearer U.S. legislative follow-through.
What could change our view
Confirmed disruption to ports, refineries, or key shipping routes lifts crude sharply.
Verifiable de-escalation and enforceable Hezbollah pullback compresses the risk premium quickly.
Tickers: $USO, $CL=F
Macro & Policy Digest
Treasury yields reversed higher on firmer labor signals and an oil-led inflation bid, with Middle East risk premia pressuring duration.
Last 24 hours
- U.S. yields rose with 10Y ~4.489% (+3bps), 2Y ~4.078% (+2bps) and 30Y ~4.989% (+2bps) as ADP May payrolls beat at +122k and WTI settled +2.41% to $96.02.
Market reaction
Treasury yields climbed across the curve (10Y ~4.489%, 2Y ~4.078%, 30Y ~4.989%) alongside a sharp move higher in oil, with the rate move reversing the prior session’s decline in borrowing costs.
Our view
Rates stay biased higher and curve volatility remains elevated as labor resilience and energy-driven inflation risk keep duration on the back foot. Next: watch official labor prints and oil’s persistence near recent highs as the key confirmation for further yield pressure.
What could change our view
A downside turn in official labor data flips the narrative toward easing.
Oil retraces sharply, cooling inflation concerns and easing long-end pressure.
Tickers: $ZN=F
Beige Book points to energy-driven inflation pressures, raising the bar for Fed easing and keeping duration exposed to a higher-for-longer path.
Last 24 hours
The Fed’s Beige Book reported prices rising “moderate to strong,” citing Middle East-linked energy costs spilling into shipping and groceries; FedWatch showed ~40.9% odds rates stay at 3.5%–3.75%.
Our view
A stickier-inflation Fed setup that keeps the policy path biased toward holding rates, limiting upside in long-duration Treasuries like TLT. The key monitor is whether energy-cost spillovers broaden and persist enough to keep price gains “moderate to strong” into the next Beige Book.
What could change our view
Energy-cost pressures fade quickly, reducing inflation momentum and easing rate-hold expectations.
Beige Book shifts to softer pricing language, signaling improving pass-through and cooling demand.
Tickers: $TLT
Trafigura warns oil buffers are thinning as Hormuz disruption and large production losses clash with peak-season gasoline draws.
Last 24 hours
Trafigura reported $4.1bn net profit for the six months to March 31 and a record $3.05bn dividend, while flagging a largely shut Strait of Hormuz and ~14mb/d production loss versus pre-conflict levels.
Our view
A higher-volatility crude tape with upside skew as temporary buffers fade and U.S. gasoline tightness raises sensitivity into peak driving season. Monitor whether inventory draws and refinery utilization constraints persist, as that is the near-term catalyst for a stronger price response.
What could change our view
Elevated inventories, floating cargoes and coordinated SPR releases keep prices muted.
Demand destruction across Asia and Africa deepens, offsetting supply disruption impact.
Tickers: $CL=F
Evergreen private equity redemption pressure resurfaces as Partners Group imposes 5% liquidity limits, dragging listed alternative managers on gating fears.
Last 24 hours
- Partners Group capped withdrawals in its Global Value SICAV evergreen PE fund at 5% of NAV after 9.8% redemption requests and flagged a U.S. PE vehicle facing ~6% Q2 requests.
Market reaction
U.S.-listed alternative managers sold off on the gating headlines, with CG down over 5%, KKR over 4%, and BX and ARES around 4%; OWL also moved lower.
Our view
This stays a sentiment-driven overhang for listed alts rather than a systemic liquidity event, but it raises the market’s discount rate for fee-bearing AUM durability. Key monitor is whether additional funds trigger 5% limits in coming weeks and whether redemptions translate into slower AUM growth into 2H26–2027.
What could change our view
More evergreen funds enact 5% limits, signaling broader retail liquidity strain.
Redemptions force secondary sales or delayed realizations, pressuring fees and valuations.
Tickers: $BX
USTR floats new Section 301 tariffs up to 12.5% across 60 economies, reopening broad trade-policy uncertainty into July.
Last 24 hours
USTR proposed Section 301 duties of 10% or 12.5% on imports from 60 economies tied to forced-labor enforcement, with comments due July 6 and public hearings July 7.
Our view
The proposal keeps a tariff overhang on broad global supply chains rather than an immediate shock to SPY-linked risk appetite. Monitor the post-comment determination for final rate schedules, any textile quota-like relief, and whether product exclusions meaningfully narrow exposure.
What could change our view
Final determination raises rates or expands coverage beyond the proposed framework.
Few product exclusions and tighter textile relief increase pass-through to consumer and industrial sectors.
Tickers: $SPY
Company Events
SpaceX locks $135 IPO target for a $1.77tn valuation and $75bn raise, with a Nasdaq debut penciled for June 12.
Last 24 hours
Updated prospectus sets a fixed $135 IPO target implying ~$1.77tn valuation, plans to sell 555.6m shares (~$75bn) plus a 83.33m-share option (~$11.2bn) ahead of a June 12 Nasdaq debut.
Our view
Treat this as a major liquidity and positioning event with the clearest near-term readthrough to TSLA via its disclosed SpaceX stake and related-party links. Next monitor point is final sizing/greenshoe exercise and any revisions to control, lock-up, or share-allocation mechanics into June 12.
What could change our view
IPO timing slips or terms are revised materially from the fixed $135 target.
Control/lock-up provisions change, altering expectations for post-IPO supply and governance.
Tickers: $TSLA
CrowdStrike beat Q1 and announced a July 4-for-1 split but in-line Q2 revenue guidance drove an after-hours selloff.
Last 24 hours
CrowdStrike reported fiscal Q1 revenue up 26% y/y with GAAP EPS $0.11, guided fiscal Q2 revenue about $1.44B near consensus, announced a July 4-for-1 split, and lifted FY2027 net new ARR growth outlook to $6.53B–$6.56B.
Market reaction
CRWD fell about 10% after hours following the report (from a $747.61 close).
Our view
The print reads as fundamentally steady but valuation-sensitive, with trading likely driven more by guidance and ARR trajectory than the stock-split optics. Key monitor is whether the raised FY2027 net new ARR growth outlook is reinforced in subsequent updates as the AIDR pipeline converts.
What could change our view
Net new ARR growth misses the raised FY2027 forecast range.
Q2 revenue trends slip below the roughly $1.43B consensus reference.
Tickers: $CRWD
Honeywell Aerospace lays out standalone targets ahead of late-month spinoff, sharpening pure-play narrative and putting cash conversion and growth algorithm under scrutiny.
Last 24 hours
At an investor day, Honeywell Aerospace guided FY2026 adjusted EBIT of $4.65–$4.75B, 2H 2026 free cash flow of $1.0–$1.5B, and 2030 earnings of at least $6.5B.
Our view
The standalone targets help frame Honeywell Aerospace as a higher-multiple pure play, but credibility will hinge on executing the 2H 2026 cash-flow ramp and sustaining mid-single-digit organic growth. Next monitor point is detailed separation mechanics and early standalone reporting that reconciles backlog, deliveries, and working capital.
What could change our view
2H 2026 free-cash-flow ramp fails due to working-capital or delivery slippage.
Spinoff structure or timing shifts, undermining peer-comparability and investor confidence in targets.
Tickers: $HON
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Informational only; not investment advice. Sources deemed reliable.