Oil’s Persistent Shadow, Yet Equities Endure
Despite geopolitical tensions in the Middle East and a subsequent spike in oil prices, market participants demonstrated a remarkable resilience, largely shrugging off concerns that had previously driven a significant inverse correlation between oil and equities. Early in the conflict, oil price volatility had a palpable impact on stock market sentiment. However, recent developments, including fears of a potential closure of the Strait of Hormuz and subsequent supply chain disruptions, failed to derail investor confidence in equities as profoundly as in March.
Monday’s trading session served as a prime example. Both international benchmark Brent crude and U.S. West Texas Intermediate (WTI) crude experienced sharp increases following reports of President Trump’s decision to halt ceasefire talks with Iran over the weekend. Despite this significant geopolitical event, both the S&P 500 and the Nasdaq Composite managed to close at record highs. Similarly, on Thursday, Brent crude reached a four-year high amidst media reports of potential U.S. military action against Iran. Yet, on the very same day, the major indices achieved their second record closing high of the week. This demonstrates a growing decoupling, where energy price shocks are less of a direct determinant of broader equity market sentiment.
Corporate Earnings: A Tale of Mixed Fortunes and Shifting Narratives
While geopolitical events captured headlines, the dominant driver of market sentiment this past week was undoubtedly corporate earnings. Wednesday proved to be a particularly significant day, with technology titans Meta Platforms, Microsoft, Alphabet, and Amazon all releasing their quarterly results. Each company delivered an earnings per share and revenue beat, yet their stock performances diverged, offering a nuanced view of investor perceptions and the evolving technological landscape.
Microsoft’s performance, while exceeding expectations, failed to entirely alleviate concerns surrounding the long-term viability of its traditional seat-based licensing model for the Office suite. The stock experienced a notable decline of nearly 4% on Thursday following the earnings release. This reaction is not entirely surprising, as Microsoft has been indirectly impacted by the broader “sell software” trade, a sentiment that has also weighed on companies like Salesforce. While the immediate reaction was cautionary, the outlook for Microsoft’s Azure cloud computing division remained robust, indicating underlying strength in its growth areas. The stock managed to recoup some of Thursday’s losses, adding 1.6% on Friday.
Amazon’s shares, while showing a modest 0.8% gain on Thursday, belied the underlying strength of its results. The e-commerce and cloud computing behemoth reported its highest operating margin across all its business segments to date, with Amazon Web Services (AWS) experiencing its fastest growth rate in fifteen quarters. This exceptional performance led to an upward revision of our price target, underscoring confidence in its continued expansion. The stock closed Friday at a fresh record high.
Meta Platforms, in contrast, saw its stock plunge 8.55% on Thursday after the company announced a $10 billion increase in its capital expenditure outlook at the midpoint. This heightened spending, particularly in the realm of generative AI, has raised investor questions about the return on investment and the demonstrated value proposition. Unlike its peers Microsoft, Amazon, and Alphabet, Meta lacks a significant public cloud offering, which may temper its appeal in certain investment circles. Despite the post-earnings dip, there remains faith in CEO Mark Zuckerberg’s vision, especially given Meta’s five-year best revenue growth and the exceptional performance of its advertising business.
Alphabet, the parent company of Google, demonstrated how substantial investments in generative AI can yield significant returns. The stock surged nearly 10% following its earnings release, adding another 0.2% on Friday. The company reported a remarkable 63% jump in Google Cloud revenue, with the segment’s operating income tripling. This performance was lauded as “extraordinary,” positioning Alphabet as the top performer among the four major tech reports released on Wednesday. Our price target was raised, reinforcing a strong buy-equivalent rating.
Rounding out the week of Big Tech earnings, Apple delivered an impressive set of results on Thursday night, sending its shares up over 3% on Friday. The iPhone maker is now trading within striking distance of its all-time closing high.
A Resilient Economic Foundation
The economic landscape, as revealed through a combination of the Federal Reserve’s policy decisions, key economic data releases, and commentary from payment giants Visa and Mastercard, presented a picture of considerable resilience. Despite the prevailing geopolitical uncertainties, the U.S. economy appears to be on a stable footing.
The Federal Reserve’s decision to maintain interest rates unchanged, announced on Wednesday, was widely anticipated. However, it was Federal Reserve Chair Jerome Powell’s commentary during the subsequent press conference that offered a more optimistic outlook. Powell characterized economic growth as “really solid across our economy,” with consumer spending demonstrating remarkable tenacity.
Visa’s quarterly report served as a compelling affirmation of Powell’s assessment of consumer strength. Earnings from the financial services sector often act as a crucial barometer for consumer health. Visa exceeded estimates for both earnings and revenues, with its CFO highlighting the “resilience in consumer spending” as reflected in U.S. payment volumes.
Mastercard CEO Michael Miebach echoed this sentiment a day later, describing the macro environment as “generally supportive with healthy underlying consumer and business spending.”
Further bolstering the narrative of a robust economy, Thursday’s jobs report indicated a stable labor market, with first-time unemployment insurance claims falling to their lowest level since 1969. Additionally, the Commerce Department reported that first-quarter gross domestic product (GDP) expanded at a seasonally adjusted annualized rate of 2%. While this figure was slightly below expectations of 2.2% growth, it represents a significant improvement from the 0.5% growth recorded in the final quarter of 2025.
This confluence of strong corporate earnings, a resilient consumer, and a stable labor market provides a solid foundation for continued market optimism, even as geopolitical risks persist. Investors will be closely watching the upcoming earnings reports for any signs of a shift in these positive trends.
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