WS #12537

The dominant narrative remains the US-Iran conflict, which is ESCALATING with Houthis warning shipping companies to avoid Saudi ports and threatening to blockade the Bab el-Mandeb Strait, as reported by Reuters and NPR. This is corroborated by multiple sources (Reuters, NPR, Guardian, Al Jazeera). However, there are active diplomatic signals: Lebanon's President Aoun is meeting Trump, and both sides signal desire for diplomacy, keeping oil markets steady. Separately, Trump imposed 50% tariffs on Canadian goods under Section 338, effective in 30 days, which could reignite trade war fears and impact automakers and consumer goods. On the earnings front, a wave of Q2 beats and raises: General Motors (GM) beat and raised FY26 adj. EPS guidance, 3M (MMM) beat and raised guidance, Hasbro (HAS) beat and raised sales guidance, Halliburton (HAL) beat, D.R. Horton (DHI) beat but lowered FY sales guidance, Equifax (EFX) beat and announced acquisition of Circulo de Credito, KeyCorp (KEY) beat, Northrop Grumman (NOC) missed EPS but raised guidance on record awards. Morgan Stanley downgraded multiple software stocks (ADBE, INTU, ESTC, BL, FROG) to underweight/equal-weight, a significant negative for the sector. China broadened market rescue with record inflows into tech ETF, supporting emerging market assets. Bitcoin rallied to $66.3K on ETF inflow streak. The carry-forward from previous situational awareness includes the TSMC price hike (bullish for TSM, bearish for hyperscalers) and the Oracle collateral bill (bearish for ORCL), both unrefuted.