Powell’s Swan Song: 8 Key Items Shaping the Stock Market Monday

These are the early headlines and other items poised to influence the market at the start of the trading day. As we share this collection of market drivers, U.S. equity futures point to a mixed market open later on Monday morning.

1. Oil climbed on Monday as stalled U.S.-Iran peace talks pointed to further disruption in Middle East energy exports, while global stocks held steady at the start ‌of a busy week of tech earnings reports and central bank decisions. Benchmark Brent crude futures rose almost 3% to touch a more than three-week high of $108.5 a barrel at one point in the session, stoking inflation worries and prompting traders to all but price out rate cuts in developed markets this year. (Reuters)

Goldman Sachs Group Inc. lifted oil-price forecasts as the prolonged closure of the Strait of Hormuz spurs “extreme” inventory draws. Brent is set to average $90 a barrel in the fourth quarter, up from a previous outlook for $80, analysts including Daan Struyven and Yulia Zhestkova Grigsby said in an April 27 note. The figure for that period is now “nearly $30 higher than before the Hormuz shock,” they said, adding to recent revisions. (Bloomberg)

Simply put, stalled peace talks and renewed uncertainty are forcing the market to contemplate “higher for longer” energy and related petrochemical prices.

With 181 S&P 500 constituents reporting this week, roughly 35% of the index’s basket, higher prices and disruptions resulting from the U.S.-Iran conflict will show their hands. Meanwhile, the flow of those higher energy and transportation prices, as well as lingering tariffs on disposable incomes, is a headwind for consumers.

This is where the cost-pressure rubber could hit the earnings road.

2. Domino’s Pizza Inc. shares slipped after the company reported a smaller-than-expected increase in comparable sales, citing growing competition and economic challenges… Domino’s U.S. same‑store sales climbed 0.9% in the fourth quarter, according to a statement Monday, less than the 2.5% increase expected by analysts surveyed by Bloomberg. Those projections had already been lowered from roughly 3.1% at the end of March. The pizza chain faced “an intensifying macro and competitive environment” though expanded market share… (Bloomberg)

3. The fragile demand recovery seen by consumer companies globally is at risk of getting stalled by chances of more prices hikes as a result of soaring energy and commodity costs due to the Middle East ‌conflict. (Reuters)

The conflict in the Middle East has disrupted supplies of crucial raw materials and ‌pushed up prices of the printed circuit boards (PCB) used in almost all electronic devices, from smartphones and computers to AI servers, industry sources and executives said. The disruption is a fresh blow to electronics manufacturers which are already grappling with soaring memory chip costs and highlights the broadening impact of the

Iran war that has wreaked havoc on supply chains, plastics, and oil supplies. (Reuters)

In April alone, PCB prices surged as much as 40% from those in March, per findings from Goldman Sachs. The question we’re contemplating is what this means for pricing actions and margins for connected device companies, and the risk of potential demand destruction as consumers grapple with disposable income pressure.

4. Google’s cloud boss says that a pair of new chips and rapid advances at its DeepMind AI lab will help it close the gap with Microsoft and Amazon in the fiercely competitive cloud computing market. Thomas Kurian said that after a slow start in AI and entering the cloud business late, Google’s “full-stack” AI strategy — which includes building chips, data centres, foundation models and products in-house — was starting to pay off. (FT)

That weekend interview in the FT sets the stage for a big week of quarterly earnings from the major hyperscalers, better known as Meta (META) , Amazon (AMZN) , Google (GOOGL) and Microsoft (MSFT) .

Once again, cloud growth rates will be sized up against one another, but we will also be assessing backlogs and remaining performance obligations as well as margins. Capital spending plans will also be a focus, and if they are nudged higher, odds are they will reintroduce monetization and margin questions.

With the technology sector overbought per the 76.19 RSI reading on Technology Select Sector SPDR Fund (XLK) shares, these four stocks will be put under an even more intense microscope that usual. That is one reason why we’re keeping the Portfolio’s market hedging positions intact.

5. China has ordered that Meta Platforms’ $2.5 billion acquisition of artificial-intelligence startup Manus be unwound. China’s National Development and Reform Commission, which has the authority to review foreign investments, said Monday that it has banned the acquisition and ordered it to be rescinded on national security grounds. (WSJ)

With reports indicating that most Manus employees are in Singapore and domestic Meta offices, it’s not clear how Chinese authorities could reverse the deal that was completed months ago. This sounds more like a warning against what is being billed as “China-shedding,” where Chinese companies move away from China and seek funding from the U.S. and other countries. So far, Meta has yet to respond, but no doubt something will be said soon, if not on the company’s earnings call on Wednesday afternoon.

6. Federal Reserve policymakers will gather in Washington this week in what may be Jerome Powell’s last meeting as head of the U.S. central bank, with energy prices still elevated and the Iran war at a standstill and likely to prolong uncertainty about the economic and monetary policy outlook. A May 15 endpoint for Powell’s eight years at the Fed’s helm now appears more likely after a major obstacle to the U.S. Senate’s confirmation of his appointed successor, Kevin Warsh, was removed on Friday. (Reuters)

With U.S. Senator Tom Tillis dropping his blockade of Warsh’s bid to become the next Fed Chair, Powell’s swan song as head of the central bank is on the horizon. Still, given what we’ve seen in recent inflation data, the higher for longer outlook for energy and related prices, and growing indications of corresponding price increases, the odds of Warsh delivering an immediate rate cut when he takes the chair are falling.

If we see an end to the U.S.-Iran conflict, the Strait of Hormuz re-opened, and oil prices declining, that could alter the calculus. Data from the CME FedWatch tool shows the market does not expect a rate cut from the current 3.5% to 3.75% federal funds rate until very late in 2027.

7. Economic data today per TipRanks: Dallas Fed Manufacturing Index (April).

8. Companies reporting today per TipRanks: AM – Domino’s Pizza (DPZ) , Verizon (VZ) .

PM – Alexandria RE (ARE) , Bed Bath & Beyond (BBBY) , Celestica (CLS) , Crane (CR) , LendingClub (LC) , Nucor (NUE) , Universal Health (UHS)