WS #13429

The dominant narrative is a strong risk-on rally driven by two converging forces: (1) renewed optimism for a US-Iran deal to reopen the Strait of Hormuz, with Treasury Secretary Bessent stating a deal could come 'today or tomorrow' and reports of Iran-Oman progress, sending oil prices down over 5% (WTI to ~$75.77, Brent to ~$78.75); and (2) a powerful AI earnings-driven tech surge, with Palantir (+29.5%) and Caterpillar (+6.5%) leading the S&P 500 (+1.79%) and Dow (+1.71%) to record closes, and the Nasdaq up 2.59%. This is a continuation and escalation of the prior risk-on tone, with the Hormuz deal narrative now more concrete and multiple sources (Bessent, AP, NYT, GDELT) corroborating imminent progress. The oil price collapse is the key macro driver, with second-order effects rippling through energy (bearish for XOM, CVX, COP), airlines (bullish for DAL, UAL, AAL), and consumer discretionary (bullish). However, the post-market session reveals a sharp bifurcation: SpaceX, despite a massive revenue beat ($7.8B vs ~$6.8B est, +92% YoY) and narrower-than-expected loss ($541M), saw its stock slide ~5-8% in after-hours trading due to a massive CapEx surge ($18.4B, +2013% YoY) and the looming August 6 lockup expiration that will unlock over $100B in shares. This is a counter-signal to the AI rally narrative, indicating that even strong AI revenue growth is being punished when accompanied by heavy spending and supply overhang. Similarly, AMD stock is sliding after its earnings, despite strong results (Q2 revenue $11.5B, +50% YoY; data center revenue $6.7B, +107% YoY), likely due to high expectations and the broader AI capex concern. These post-market moves suggest the AI trade is becoming more selective, with investors punishing heavy capex and rewarding efficiency. Other notable signals include: Jeff Bezos selling ~15 million Amazon shares (~$4.1B) via a pre-arranged plan, a minor overhang on AMZN; Novo Nordisk beating Q2 estimates (EPS $0.96 vs $0.81 est, revenue $12.209B vs $11.35B est), positive for NVO; and a US Senate report alleging JPMorgan, Deutsche Bank, and Bank of America enabled Epstein's money laundering, a regulatory overhang for financials. The Russia-Ukraine conflict continues to escalate with massive missile strikes on Kyiv and Ukrainian drone attacks collapsing Russian oil refining to 2002 levels, which supports oil prices but is currently overshadowed by the Hormuz deal hopes. The Fed's Paulson kept an open mind on rates, with three dissents for a hike at the last FOMC, suggesting a hawkish tilt that could pressure growth stocks if inflation persists.