Brent jumped 5% overnight. The April CPI drops at 8:30 tomorrow. And Friday's jobs beat wasn't as clean as the headline.
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Iran returned its counterproposal to the U.S. peace plan over the weekend. It demanded management of the Strait of Hormuz, an end to the naval blockade, and an immediate ceasefire on all fronts. The response lasted less than 24 hours before it was dismissed as unacceptable, and Brent crude is surging roughly 5% this morning to around $105 a barrel.
What matters:
WTI is climbing back toward $100 after settling near $96 on Friday. The Strait remains closed with no diplomatic framework in sight.
The April CPI report lands tomorrow at 8:30 AM ET. Consensus expects headline inflation of 3.7% year over year, with core CPI at 2.7%.
Friday's April jobs report came in at 115,000 new positions, nearly double the 62,000 consensus, marking the first back-to-back monthly gain in nearly a year.
Cisco (CSCO) and Alibaba (BABA) both report Wednesday, testing AI enterprise spending and China's consumer recovery in the same session.
The peace premium that pulled Brent below $101 on Friday just reversed in a single session. With no deal and no timeline for one, the oil floor is resetting higher. Every Q2 earnings model built on the assumption that crude was headed back below $100 needs revision.
The integrated majors absorb this best.
Exxon Mobil (XOM) reported Q1 adjusted earnings of $1.16 per share on $85 billion in revenue, beating estimates on both lines. The stock trades at roughly 14 times forward earnings with a 3.5% dividend yield. Chevron (CVX) beat Q1 adjusted EPS estimates by 46% and returned $6 billion to shareholders through buybacks and dividends in the quarter. Both carry minimal exposure to Gulf shipping routes relative to their European peers, and both benefit directly from a prolonged Hormuz closure keeping Brent elevated.
The energy trade has rotated through producers, refiners, and now circles back to the integrated majors as the market accepts that this is not a two-week disruption. It is a structural repricing of supply risk.
Tomorrow's CPI is where the real tension sits.
The Cleveland Fed's nowcast projects headline April CPI at 3.56% year over year. Wall Street consensus is higher at 3.7%. Core CPI is expected at 2.7%, roughly flat from March.
The oil-driven component makes this print different from any in the last year. Gasoline prices ran hot through April as Brent averaged above $105 for most of the month. If headline CPI prints above 3.7%, the rate-cut conversation that reopened briefly after Friday's soft wage data (0.2% month over month, 3.6% year over year) closes again. If it prints below consensus, the market will rally on the theory that oil inflation is passing through slower than feared.
Realty Income (O), the largest net-lease REIT, is the direct expression of that rate bet. It trades at roughly 14.5 times adjusted funds from operations with a 5.2% dividend yield. It has underperformed the S&P 500 by double digits year to date as Treasury yields climbed. A CPI miss would be the catalyst that starts reversing that trade.
Friday's jobs number was stronger than expected, with a caveat.
The economy added 115,000 positions in April, beating the 62,000 consensus. Health care added 37,000. Transportation and warehousing added 30,000. Retail added 22,000.
But federal government employment fell for another month, shedding 9,000 positions. Manufacturing lost 2,000. Information lost 13,000. The breadth of private-sector hiring is narrowing even as the headline number beats. That matters for Q3 earnings visibility more than it matters for the Fed.
The S&P 500 closed Friday at 7,399, its sixth consecutive weekly gain. The Nasdaq finished at 26,247. The Dow settled at 49,609.
Gold is trading around $4,730 this morning. Bitcoin is near $80,200. The 10-year Treasury yield is around 4.40%.
Futures are pointing modestly lower as oil reprices higher on the failed diplomacy. The S&P is at records, Q1 earnings season has delivered 15.1% blended growth with 84% of companies beating estimates, and Friday's jobs number removed the recession argument. The only obstacles between here and new highs are tomorrow's CPI print and an oil shock that refuses to resolve.
More tomorrow.