Morning Bid: Suddenly the Strait of Hormuz is ’irrelevant’ to the US

On Monday, the Strait of Hormuz's significance to the United States appears to be fading, as oil may be redirected through pipelines, according to Treasury Secretary Scott Bessent. However, Iran asserts that a deal with Oman to establish new shipping lanes in the Strait is nearing completion, but insists that reopening the waterway depends on meeting certain U.S. conditions, which appears improbable.

The Red Sea port city of Mocha has reportedly witnessed a resurgence of attacks by the Houthi rebels, causing unease among shippers navigating the Bab el-Mandeb strait. Brent crude prices experienced a 1% increase, reaching $84.38 a barrel, with U.S. crude following suit by rising 0.7% to $78.75. This comes as shipping through the Strait of Hormuz is minimal, with only two tankers reported on Friday.

Despite a disappointing U.S. payrolls data, which has put the Federal Reserve's September interest rate hike at a 44% probability, market expectations may shift based on the consumer price data released on Wednesday. Forecasts suggest a potential 0.1% rise in the headline inflation figure and a 0.2% increase in the core inflation rate. Retail sales for July are expected to show a modest growth of 0.2%, though there is a risk of disappointment due to Amazon's decision to shift its Prime Day sale from July to June.

Wall Street showed a slight decline following Friday's record closing, while the Nasdaq benefited from a 5% gain for the week, buoyed by strong earnings reports. According to Bank of America analysts, nearly 90% of S&P 500 results have been released, with earnings per share up 30% year-to-date, excluding gains from Alphabet and Amazon.

The earnings-per-share rate exceeded the 76% benchmark, placing it among the strongest levels since 2021. They also noted that artificial intelligence (AI) has become the standout performer, with a median earnings per share growth rate of 28%, compared to 12% for non-AI-related stocks. However, consensus projections anticipate AI growth to decelerate to 16% in the following quarter.

Market analysts expect lighter earnings releases this week, focusing on companies such as semiconductor manufacturer Applied Materials, networking equipment producer Cisco, and cloud infrastructure technology company CoreWeave.