WS #16553

The dominant market narrative has shifted from geopolitical escalation to a sharp, earnings-driven tech correction. Alphabet's 13% drop on an earnings miss and capex cuts has triggered a broad reassessment of AI monetization, dragging the broader market lower. This is corroborated by a 13% decline in Alphabet's stock and a general tech selloff, while Microsoft and other tech giants face scrutiny over spending versus returns. The previous escalation in Middle East tensions is now being counteracted by renewed US-Iran peace efforts, which have caused oil prices to fall and eased supply fears, effectively dampening the bearish energy and airline signals that were previously dominant. In the energy sector, the narrative is bifurcated. While geopolitical risks remain, ExxonMobil and Chevron have pulled out of a Persian Gulf energy conference due to security concerns, signaling a tangible risk to operations. However, this is offset by falling oil prices driven by diplomatic progress. In the defense sector, L3Harris reaffirms strong growth, and Lockheed Martin reports record earnings, maintaining the bullish thesis for defense stocks despite the broader market weakness. Meanwhile, SoFi Technologies surged 13% on a strong outlook, and Rocket Lab rose 8% on hardware delivery, showing pockets of strength in fintech and aerospace. Notable cross-sector developments include the DOJ launching an antitrust probe into Nvidia's potential acquisition of Hugging Face, adding regulatory headwinds to the AI chip sector. Additionally, a report that SpaceX earns over a third of its revenue from Anthropic highlights the deepening integration of AI infrastructure, though this is a private market dynamic. The Fed held rates steady, and the Loonie hit a six-week high, but the primary market mover remains the tech earnings disappointment and the resulting rotation away from high-multiple growth stocks.