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The market is betting on peace in the war with Iran while riding the relentless surge in tech stocks.
Asia markets rumbled again on Thursday as Japan returned from its extended spring holidays and the Nikkei 225 roared nearly 6% higher on the opening day of trading.
That takes the regional benchmark close to a 25% gain for the year, well outpacing the 11.4% advance recorded for the tech-focused Nasdaq and the 8% rise for the S&P 500.
Not much has changed on the ground, or in the Strait of Hormuz, this week apart from sentiment, which seems tied to reports of a near-term deal between the U.S. and Iran that will end two months of hostilities and reopen the world’s busiest oil and energy conduit.
Crude prices have slumped more than 12% over the past two sessions, with Brent futures falling below the $100 a barrel mark, on hopes of a near-term agreement that will lead to longer, more detailed peace talks between Washington and Tehran.
But with stocks now more than 16% higher than their late March trough, and the first-quarter earnings season largely finished, the mood on Wall Street is expected to switch quickly.
Jobs data on Friday could put the final nail in bets on a Federal Reserve rate cut this year, while crude prices and Treasury bond yields remain elevated enough from their prewar starts to suggest inflation will continue to echo through the world’s largest economy well into the fall.
The war may be nearing its end, but the cleanup in certain markets will continue. The only question that remains is whether stocks, and in particular tech, can maintain their pristine edge.
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Arm beat expectations for quarterly earnings and revenue but suggested uncertainty around meeting surging demand for a new homegrown chip. Its CPUs are showing the benefits of balancing performance and energy consumption, attracting Amazon Web Services, Microsoft Azure and Google Cloud.
Arm reported fourth-quarter adjusted earnings of 60 cents a share and revenue up 20% to $1.49 billion. Licensing revenue rose 29% from a year ago, to $819 million, also beating forecasts. It was already getting a boost from AMD, which has doubled its estimate for the size of the server CPU market by 2030.That’s a market that Arm is rapidly entering. Arm also provided good guidance, seeing $2 billion of demand for a new homemade chip in fiscal years 2027 and 2028 combined, twice its previous estimate. The data center business, becoming its largest, is on track for $15 billion.One soft spot for the quarter was royalty payments, indicating that shipments of Arm-based chips may have been lower than expected during the period. Royalty revenue rose 11% to $671 million, driven by growth in smartphones and AI.Arm’s instruction set architecture is the major alternative to the x86 architecture used by Intel and AMD. It makes designs for different parts of chips, and makes money from licensing and royalties paid by customers Apple, Nvidia, Samsung, Qualcomm, and others.
What’s Next: The rapid growth of mobile devices has made Arm the most prevalent instruction set in the world and has created a huge ecosystem of chips, software, and developers. Now Arm CPUs are challenging x86 chips, and hyperscalers all have custom Arm CPUs available for customers to rent over the internet.
Apple’s stock reached a record close of $287.51 each on Wednesday, its first record since December after starting the year in a bit of a rut. New management is on its way in for the iPhone maker, and there’s more it has to prove in just a few short weeks to keep investor sentiment on the up and up.
A major concern has been that Apple has fallen behind on its artificial intelligence updates, keeping some would-be investors on the sidelines. Wall Street and consumers are waiting for an AI-powered Siri chatbot to be released. Apple says a more personalized Siri is coming to users “this year.”Other company updates have helped boost the stock recently. Shares rose 3.2% on May 1 after Apple beat second-quarter expectations and gave strong revenue guidance for the June quarter. That guidance was especially important as consumer confidence comes into question amid sticky inflation and rising gasoline prices.Apple also announced on April 21 that current CEO Tim Cook will be stepping down, and John Ternus, currently Apple’s senior vice president of hardware engineering, will succeed him in September. The stock’s rebound signals that investors are confident in what Apple will look like under Ternus’s leadership.Wall Street should also be prepared for what’s ahead. Apple is kicking off its Worldwide Developers Conference on June 8. This is a crucial event every year that Apple uses as a platform to announce software and development updates. It was at WWDC 2024 where Apple first unveiled Apple Intelligence.
What’s Next: Two years later, investors are still waiting for this tech to wow. “Apple is executing very well into a big event that should help change the narrative,” says Melius Research analyst Ben Reitzes.
Flutter Entertainment, parent of U.S. sportsbook FanDuel, is well situated for opportunities like the World Cup, likely to be the largest betting event in history. But it looks equally vulnerable to challenges like prediction markets in the U.S. that closely mimic sports betting but beyond state regulators’ reach.
Its quarterly earnings were affected by Flutter’s investments in its own prediction-market platform called FanDuel Predicts, which started last quarter in Texas and California, the biggest states where traditional sports betting is still illegal. Revenue from the business was “non-material.”CEO Peter Jackson told Barron’s in an interview that FanDuel Predicts is more about onboarding customers in states where traditional online sports betting may eventually be legalized. Apart from FanDuel Predicts, Flutter has also begun market-making activities on a rival prediction-market platform.This effectively makes Flutter the counterparty in certain prediction market trades. It would mark an evolution for prediction markets, which have traditionally set themselves apart from FanDuel and other sportsbooks because there is no “house.” Now the house—in this case Flutter—is getting involved.Flutter’s market-making is mainly in prediction-market parlays, Jackson says, where bettors link together multiple discrete bets that generate a big payout if each bet proves correct. Parlays are a bread-and-butter product for sportsbooks.
What’s Next: For the first quarter, Flutter reported adjusted earnings of $1.22 a share and revenue of $4.3 billion, up 17% and beating expectations. But earnings were down 22%, and Flutter lowered its full-year outlook, expecting revenue of $18.31 billion, just below expectations.
Consumers are cutting back on how much they’re spending to fill up their gas tanks these days, and most household budgets are still getting walloped by higher prices. It could be an ominous sign for consumer spending, especially if gasoline remains above $4 a gallon through the summer, as futures prices suggest.
Household spending on gasoline rose more than 15% in March, while households pulled back on inflation-adjusted consumption by 3%, according to the latest analysis released Wednesday by the Federal Reserve Bank of New York. The impact of higher gas prices fell hardest on lower-income Americans, threatening to further exacerbate inequities among income groups.Until recently, Americans shouldered higher gasoline prices without reducing their overall spending, mostly by relying on savings and higher average tax refunds as a cushion. National average gasoline prices have risen from under $3 a gallon in late February to more than $4.50 a gallon this week, AAA says.Lower-income households are hard-hit. Those earning less than $40,000 a year spent 12% more on gas in March. That spending jump might have been more if this cohort hadn’t also significantly cut back on their real gas consumption by 7%—the biggest pullback across income groups.Households with incomes between $40,000 and $125,000, meanwhile, spent nearly 15% more at gas stations in March, but only cut their usage by 4.8%. Households earning over $125,000 barely cut gas consumption and spent almost 19% more on gasoline in March.
What’s Next: Americans aren’t just cutting back on gasoline. Appliance maker Whirlpool cut its full-year earnings guidance in half as consumer confidence takes a nose dive. Executives said the war and affordability concerns are making people more cautious about big-ticket purchases.
Kevin Warsh will inherit a central bank that appears to be stuck in policy limbo due to concerns about escalating inflation. But the likely next Federal Reserve chair, expected to be confirmed by the Senate later this month, may have more options than investors think.
Bond traders no longer expect the Fed to cut interest rates this year. And a May inflation report, due early next week, is widely expected to show prices rising at an annual pace near 4%, almost double the Fed’s 2% target.The dominant view on Wall Street is that Warsh will be boxed in: While the Trump administration is pressing for rate cuts, the Fed’s policy committee is heading in the opposite direction. But that assessment underestimates both the man and the moment.He can accomplish satisfying the hawks on his committee, denying the White House an easy target, and preserving the credibility he will need to make larger moves later this year if he convinces the Federal Open Market Committee to hold rates steady through the summer, removes the Fed’s current signal that a cut is coming, and waits for more clarification on the impact of energy prices.
What’s Next: The view from the White House appears to be moderating. Treasury Secretary Scott Bessent—who pushed aggressively for rate cuts earlier this year—softened that position in recent weeks, giving Warsh political cover that current Chair Jerome Powell never enjoyed.
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