Bad News Is Bad News Again

On Wall Street, investors are bracing for a week that feels bigger than a normal turn of the calendar. Yet they remain optimistic: U.S. stocks look set to open a bit higher after the recent selloff. Oil is pushing up again, energy shares are catching a lift, aluminum producers are surging and fertilizer names are getting attention too. The second quarter starts on Wednesday: Jerome Powell is due to speak and so is John Williams. Fresh labor-market numbers are coming, capped by Friday's jobs report. Then Wall Street closes for Good Friday, which means traders have only a short window to process a week's worth of stress before the lights go out.

Investors, of course, remain nervous. The question is: what exactly are they nervous about? The answer is not just bombs, missiles, or headlines, but the way those events are now seeping into every part of the economic outlook at once. Brent has jumped above $107 a barrel, while WTI has moved above $100. Investors are now trying to price two things at the same time. First, how badly the widening Middle East conflict may disrupt energy flows. Second, what happens if oil gets so expensive that it stops being merely inflationary and starts choking growth.

The market will be parsing every syllable from Powell and Williams for signs that the Federal Reserve now sees higher oil as a threat to inflation, growth, or both. Only weeks ago, investors expected rate cuts this year. Now money markets are no longer pricing in easing from the Fed this year and are even entertaining the possibility of rate hikes in 2026. Europe has undergone a similar rethink. Short-term bond yields have jumped, especially at the front end of the curve, as investors abruptly shifted from dreaming about relief to preparing for restraint.

This is why the old comforting line - "bad news is good news because the Fed will cut" - has stopped working. In this market, bad news is just bad news again. In this context, the labor data will be in focus: if the job market looks solid, the Fed may feel it has room to stay tough while energy prices rise. If the labor market weakens, the central bank's dilemma gets uglier. The Fed has a dual mandate, and right now both sides of it are trying to start a fight in the same room. Recent data have already hinted at strain. Job losses have shown up too often in recent months to dismiss lightly. If Friday's report confirms broader weakness, policymakers will have to decide whether inflation from war should outweigh softness at home.

Today's modest rise in stock futures should be seen in that light: not as confidence, but as hesitation with a pulse. Yes, some investors are clinging to the hope of diplomacy. Donald Trump said the U.S. and Iran had been meeting directly and indirectly. Pakistan has said meaningful talks could be hosted soon. Egypt, Saudi Arabia, and Turkey are part of a broader diplomatic effort. Overnight, Trump suggested Iran's new leaders were being "very reasonable" and said he believed he could secure a deal. Markets, of course, want to hear that.

Meanwhile, the war itself is widening. Over the weekend, Yemen's Houthi forces entered the conflict and launched attacks toward Israel. The Bab al-Mandeb strait is now in sharper focus: if that route becomes harder to use, ships may be forced around the Cape of Good Hope, doubling transit times and raising costs. And because the Strait of Hormuz is already effectively constrained, alternative routes are suddenly doing a lot of heavy lifting. Saudi infrastructure moving crude via the Red Sea is reportedly running flat out.

The rhetoric out of Washington is not helping. Trump told the Financial Times that the United States could "take the oil in Iran" and floated the idea of seizing Kharg Island, Iran's main export terminal. Other reports suggest the administration is weighing risky operations inside Iran, including a possible effort to extract uranium. The Pentagon is also reportedly preparing for the possibility of extended ground operations. If this conflict shifts from an air campaign to something larger and more direct, markets will have to reprice not just risk, but duration.

This is why last week, Friday's selloff capped a fifth straight losing week for major U.S. indexes. The Dow is in correction territory, down more than 10% from its high. The Nasdaq is also in correction, and the Russell 2000 is there too. The S&P 500 is uncomfortably close. The benchmark indexes ended Friday at their lowest levels since August. Bonds are also struggling: the 10-year Treasury moved back toward this year's highs near 4.5%, and the 30-year approached 5%.

Even supposedly safer corners of the market are behaving strangely. Utilities, normally a classic defensive trade, have struggled. The dollar has strengthened on risk aversion. Gold is rising, but not in runaway fashion, because higher oil also implies tighter central banks. In other words, there is no single clean shelter.

That does not mean there are no winners. Exxon and Chevron are benefiting from the jump in crude. Aluminum producers such as Alcoa and Century Aluminum are soaring as prices hit around four-year highs after Iranian strikes hit production sites in Bahrain and the UAE. Fertilizer companies are attracting interest on the prospect of supply disruption. Sysco, meanwhile, is sliding on reports it is nearing a large acquisition of Restaurant Depot.

Today's economic highlights:

On today's agenda: Housing starts in Japan; KOF leading indicators in Switzerland; in the United Kingdom, BoE consumer credit, mortgage approvals, and mortgage lending; economic sentiment in the Euro Area; business confidence in Spain; in Germany, preliminary monthly and yearly inflation rates; in the United States, the Dallas Fed manufacturing index, Fed Chair Powell's speech, and Williams' speech. See the full calendar here.

• Dollar index: 100.248
• Gold: $4,528
• Crude Oil (BRENT): $107.90 (WTI) $101.37
• United States 10 years: 4.40%
• BITCOIN: $67,516

In corporate news:

• SLB, Halliburton and Baker Hughes face near-term earnings pressure because the Iran war has disrupted Middle East energy activity, cutting drilling demand even as higher oil prices may later drive repair work.
• Apple's Ireland-based subsidiary was fined £390,000 by the UK for breaching Russia sanctions through two unlicensed payments made in 2022.
• Amgen said Repatha reduced the risk of first major cardiovascular events by 31% in high-risk diabetes patients in a subgroup analysis of its phase 3 VESALIUS-CV trial.
• Nvidia is trading at its lowest forward P/E in seven years as war-related market stress and doubts about AI spending weigh on the stock despite strong earnings expectations.
• Eli Lilly said it is optimistic about reaching a deal with the UK government by summer to raise NHS drug prices and support renewed investment in Britain.
• A Keurig Dr Pepper-backed bid secured 96.2% of JDE Peet's, clearing the way for settlement, delisting from Euronext Amsterdam and a squeeze-out of remaining shareholders.
• Apollo Global Management is considering Sun Belt locations including Austin, south Florida and Nashville for a second U.S. headquarters alongside New York.
• Walt Disney said the Disneyland Paris expansion is expected to create 1,000 new jobs.
• Morgan Stanley downgraded global equities to equal weight and shifted toward cash and U.S. Treasuries as the Middle East conflict drives investors toward safer assets.
• Merck said Winrevair met the primary endpoint in a phase 2 study in a heart failure-related pulmonary hypertension population and will advance to phase 3.
• Eli Lilly signed an AI-driven drug discovery deal with Insilico Medicine worth up to $2.75 billion, including $115 million upfront and potential milestone payments.
• Bank of America agreed to pay $72.5 million to settle a lawsuit alleging it enabled abuse by Jeffrey Epstein, while denying wrongdoing.
• Chevron and Woodside Energy are working to restore Australian gas exports after cyclone damage disrupted output at key LNG facilities, with repairs expected to take weeks.
• Bristol-Myers Squibb said its phase 3 trial of Camzyos met its main goal in adolescents with symptomatic obstructive hypertrophic cardiomyopathy.
• Rocket Lab completed its first dedicated launch for the European Space Agency, putting the first two Celeste navigation satellites into orbit.
• Funds managed by BlackRock invested €50 million in Finnish quantum computing company IQM to support expansion, technology development and its planned U.S./Helsinki listing.
• Palantir Technologies and Stellantis renewed and expanded their data software partnership for another five years, adding broader use of Foundry and selected deployment of AIP.
• Carlyle agreed to acquire Omron's device and module solutions business in a deal valuing the transferred business at about ¥81 billion.
• Global airlines including United Airlines, Air New Zealand and SAS are raising fares and cutting capacity as surging fuel prices threaten profitability and travel demand.
• Nike's ongoing decline in China is exposing execution problems such as weak localization, inventory missteps and slower responses to domestic competition from Anta, Li Ning and a resurgent Adidas.
• Citigroup appointed Anders Svensson as head of its natural resources group for Australia and New Zealand within capital markets and advisory.
• Alcoa shares rose sharply after aluminum prices jumped following significant damage at Emirates Global Aluminium's Al Taweelah site in the UAE.
• Atlantic Sapphire secures a $10 million bridge loan.
• Caterpillar and Deere saw their shares fall on Friday after Donald Trump demanded lower tractor prices.
• Merck & Co announced that Winrevair met its primary endpoint in the Phase II Cadence trial.
• Meta is set to unveil two new models of Ray-Ban (EssilorLuxottica) smart glasses this week designed for people who wear prescription lenses, according to Bloomberg.

Analyst Recommendations:

• Amd (Advanced Micro Devices): Phillip Securities upgrades to buy from accumulate with a target price of USD 280.
• Analog Devices, Inc.: Arete Research upgrades to buy from neutral with a price target raised from USD 323 to USD 389.
• Boston Scientific Corporation: Raymond James downgrades to outperform from strong buy and reduces the target price from USD 97 to USD 88.
• Expedia Group, Inc.: Jefferies upgrades to buy from hold and raises the target price from USD 240 to USD 300.
• Hartford Financial Services Group (The), Inc.: Keefe Bruyette & Woods downgrades to market perform from outperform and reduces the target price from USD 163 to USD 149.
• Insmed Incorporated: Morgan Stanley upgrades to overweight from equal weight with a price target raised from USD 166 to USD 212.
• Instacart (Maplebear): Jefferies upgrades to buy from hold and raises the target price from USD 38 to USD 45.
• Slm Corporation: Compass Point Research & Trading upgrades to neutral from sell and reduces the target price from USD 23 to USD 22.
• Coinbase Global, Inc.: Bernstein maintains its outperform rating and reduces the target price from USD 440 to USD 330.
• Conagra Brands, Inc.: Deutsche Bank maintains its hold recommendation and reduces the target price from USD 18 to USD 14.
• Elf Beauty: Deutsche Bank maintains its hold recommendation and reduces the target price from USD 95 to USD 68.
• Lyondellbasell Industries N.v.: Wells Fargo maintains its equalweight recommendation and raises the target price from USD 70 to USD 87.
• Primo Brands Corporation: Deutsche Bank maintains its hold recommendation and reduces the target price from USD 24 to USD 19.