WS #16324

Equity markets opened lower as the semiconductor sector faced a severe repricing, with AMD and Intel down roughly 5% and Lam Research plunging 10% on weak forward guidance. This deepens the tech selloff initiated in the previous cycle, though the narrative is complicated by Meta's earnings beat, which was overshadowed by a 6% drop due to the market's fear of rising AI capital expenditure costs. The broader macro backdrop remains supportive for equities, evidenced by US jobless claims plunging to a 57-year low, yet risk-off flows are rotating into defensive sectors like healthcare and staples. Geopolitical tensions in the Middle East continue to escalate, driving a sharp rise in crude oil prices toward $99 per barrel. This energy spike is creating a clear cross-asset divergence: energy producers and refiners are seeing margin bids, while airlines and shipping stocks face headwinds from higher fuel costs. Concurrently, geopolitical risk is boosting defense stocks, with Lockheed Martin lifting its annual forecast following a $7B F-35 deal. The combination of strong labor data and rising oil prices is keeping the Fed's policy path ambiguous, though bond yields are currently falling as investors seek safety in Treasuries.