Markets Drift Lower Ahead of Big Tech Earnings as Oil Extends Rally

U.S. stocks started the week on a mixed but softer note as investors balanced the start of a pivotal earnings week against rising geopolitical tensions in the Middle East. Technology shares stabilized after last week's sharp selloff, but broader market sentiment remained cautious as higher oil prices, rising Treasury yields, and uncertainty surrounding the U.S.-Iran conflict tempered risk appetite.

Key Headlines & Market Movers:

• Markets Turn Lower Ahead of Key Earnings: Major indexes opened higher but gradually lost momentum throughout the session as investors positioned ahead of earnings from Alphabet and Tesla later this week. Last week's broad market decline, led by technology stocks, continued to influence sentiment, although semiconductor shares managed modest gains after recent weakness. With several Magnificent Seven companies set to report over the coming weeks, markets are looking for confirmation that AI-driven investment and earnings growth remain intact.

• Corporate News Highlights Diverging Sector Performance: Alibaba rallied after unveiling its latest AI model, signaling that competition in generative AI continues to intensify globally. Meanwhile, Warner Bros. Discovery and Paramount Skydance declined after a federal judge temporarily blocked their proposed transaction amid antitrust challenges. AMC posted one of the day's strongest gains following quarterly results, while Domino's Pizza also advanced after reporting earnings that were well received by investors.

• Middle East Tensions Keep Oil Prices Elevated: Crude prices extended their recent rally after President Trump pledged further military retaliation following the deaths of three U.S. service members, while Houthi militants announced a maritime embargo targeting Saudi Arabia. Continued attacks near the Strait of Hormuz and the Bab el-Mandeb Strait have heightened concerns over global energy supplies, with Brent crude approaching $90 per barrel. Analysts caution that prolonged disruptions to shipping routes and already-tight inventories could push oil prices above $100 per barrel, increasing inflationary pressure and contributing to higher gasoline prices.

S&P 500 Sector Performance

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Looking Ahead

Investors will focus on earnings from major technology companies, particularly Alphabet and Tesla, for insight into AI investment trends and corporate spending. Markets will also closely monitor developments in the Middle East, as any further escalation could have significant implications for energy prices, inflation expectations, and overall investor sentiment. Rising Treasury yields and the trajectory of oil prices are likely to remain key macro drivers throughout the week.

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