WS #16182

The dominant market narrative has shifted from the previous AI chip selloff to a sharp geopolitical escalation in the Middle East, marked by the US deploying a third aircraft carrier to the region following a secret meeting between Secretary of State Rubio and Israeli Prime Minister Netanyahu. This escalation is driving a rotation out of high-beta technology and into defense and energy, with RTX reporting an 11% revenue beat and expanding margins, while Broadcom receives a bullish price target upgrade to $580. Concurrently, crypto markets are rallying on hopes of a US-Iran deal, with Bitcoin reclaiming $83,000 and BlackRock’s IBIT posting its largest inflow in a year, creating a divergence between risk-on crypto and risk-off traditional equities. In the domestic economy, the housing sector shows signs of distress as builders slash prices to attract buyer traffic at a 14-year low, while the Federal Reserve's upcoming meeting remains the primary macro focus, with prediction markets pricing in a rate hike. Corporate earnings previews for IBM and Texas Instruments highlight the ongoing tension between AI-driven demand and broader macroeconomic headwinds. The defense sector is clearly benefiting from the escalation, with significant 13F filings showing increased positions in Lockheed Martin and General Dynamics, corroborating the geopolitical thesis.