WS #13436

The dominant narrative is the escalating optimism over a potential US-Iran deal to reopen the Strait of Hormuz, with multiple sources (CNBC, GDELT, Reuters, Al Jazeera) corroborating that Treasury Secretary Bessent said a deal could come within days, and CENTCOM confirming the southern route remains open. This has driven oil prices down sharply (Brent below $80, WTI ~$75.68, down ~5.8%), which in turn has lifted US equities to record highs (S&P 500 +1.79% to 7,736.52, Dow +1.71% to 54,085.88, Nasdaq +2.59% to 26,584.99) and pressured Treasury yields (10-year at 4.62%). The narrative is ESCALATING in terms of market impact, as the deal hopes are now being priced in across asset classes. However, a counter-signal has emerged: SpaceX's first earnings report as a public company showed capex of $18.37B (vs ~$13B expected), with 80%+ going to AI, causing the stock to fall ~7.5-8% after hours and raising concerns about AI spending sustainability across the sector. This is a potential headwind to the AI trade that has been driving the rally. Additionally, AMD's earnings beat was overshadowed by rising capex concerns, with the stock giving back gains in extended trading despite strong data center revenue growth. The US-China tech tension is also escalating, with reports that the US is drafting a ban on Chinese data center services, causing Chinese optical transceiver makers (Zhongji Innolight, Eoptolink) to open sharply lower, and China's STAR Composite Index up 5% but ChiNext set to open down 3%. This could have second-order effects on US tech supply chains. The Fed's hawkish stance remains a backdrop, with NY Fed's Williams optimistic on inflation but Treasury options positioning showing traders hedging against a deeper selloff in long-dated bonds. Overall, the market is in a risk-on mode driven by oil price declines and deal hopes, but the AI capex concerns and US-China tech tensions are emerging as potential counter-signals.