US EQUITY OPEN: Mag-7 earnings lead Tech and Indices lower as the Middle East situation remains fragile

OPEN: US indices open in the red with the mega-cap sectors lagging and weighed on by weakness in Meta and Tesla following their earnings (more below) which leads the AI trade lower. To the upside, the defensive-natured Consumer Staples and Health sit. Given the risk-off trade, WTI and Brent are surging, with precious metals lower, as the Middle East situation continues to remain very fragile as the latest updates include the IRGC Navy stating four vessels transferring oil cargoes were struck in the Persian Gulf, while three other vessels hit sea mines yesterday west of the Strait of Hormuz, warning that US efforts to encourage passage could result in strikes on US bases. Meanwhile, Saudi Aramco has reportedly instructed staff to evacuate its Dhahran headquarters and work from home. Treasury yields are notably lower across the curve as they see a haven bid, and remain resilient to the current energy landscape. Out of the US, initial jobless claims continue to hover around 200k, indicating the low hire-low fire US economy. Ahead, the calendar is pretty light, in terms of scheduled risk events, with US 5yr TIPS auction and earnings from WDC and BE the highlights after-hours.

• Meta Platforms (META): Earnings beat, raised FY capex to the high end; FY27 outlook limited.
• Tesla (TSLA): Cautious outlook for Optimus, delayed robotaxi revenue, and high expected chipmaking costs overshadowed EPS beat.
• IBM (IBM): GM declined w/ consulting rev. flat.
• Lam Research (LRCX): Guidance underwhelmed some expectations.
• Blackstone (BX): Revenue missed.
• Procter & Gamble (PG): Earnings beat.
• Comcast (CMCSA): Adj. EPS & rev. beat.
• SAP (SAP): Cloud revenue and backlog growth beat expectations.
• Alibaba (BABA), PDD Holdings (PDD), JD.com (JD): Chinese regulators reportedly summoned major e-commerce platforms over product quality.

Sessions where a handful of mega-cap prints set the index tone have become the standard pattern of concentrated markets: when the largest weights report together, single-stock reactions dominate breadth, and the tape has historically sorted quickly between beats that raise spending and beats that raise guidance. The Meta reaction fits a recurring dynamic in the AI complex, where upward capex revisions have alternately been rewarded and punished depending on the prevailing mood toward return on investment, while Tesla's pattern of promising timelines that slip has made the market discount forward commentary more heavily than headline EPS. On the geopolitical leg, tanker strikes and mine incidents around the Strait of Hormuz have a well-worn template: the first transmission channel is freight and war-risk insurance premia rather than physical supply, and crude spikes in past episodes have faded unless actual loading or transit volumes were curtailed, which is why an Aramco evacuation order matters more as a tell than the vessel headlines themselves. The combination of surging crude and a bid across the Treasury curve is the classic haven configuration in these episodes, with yields historically staying offered only if the energy move starts feeding inflation expectations, a distinction the TIPS auction this afternoon will speak to directly. Claims pinned near the low end of their range keeps the low-hire, low-fire characterisation intact and leaves the labour data a passive rather than active input. The follow-ons that have mattered in comparable stretches are whether tanker traffic through the strait actually slows, whether other Gulf producers issue similar staff directives, and whether the capex scepticism shown toward Meta extends to the remaining mega-cap reporters.