Crude Oil Rallies on U.S.-Iran War Escalation, APLD Beats Earnings, WOLF Pentagon Contract

Uh let's bring in Kevin Green, senior markets correspondent right away to help set up the action today. All right, KG, we're looking at another pullback today amid uh elevated yields. Let's start out with your big picture take. >> Well, we did see a little bit of pressure in the markets yesterday, but we were able to get off the lows and did see some positive rotation back into some of the mega cap names towards the end of the the session. But we are seeing some pressure early on this morning. Obviously, there's a lot of news headlines that are kind of hitting the tape, especially overnight. We did see two strikes on Saudi airports by the Houthis. That's kind of an escalation from what we have seen in the past. We also have remarks from President Trump saying that he's not really looking for a deal with Iran, at least at the moment here. We also had a Russian refinery getting hit, a pedrochemical plant in Russia getting hit, and then we continue to see vessels within the strait uh getting within the straight of Hormuse as well as near the Babel Mandab uh continuing to get hit as well. So a lot on the energy front which is pushing prices a little bit higher and then also once again yields kind of inching up because of the inflation risk moving forward here. So a pullback is understandable but if we kind of look at it from a technical standpoint Diane uh we are kind of coming back and maybe testing the 20 period moving average for the E- mini S&P 500 chart and that could be a key area of support which would then continue the trend of higher highs as well as higher lows and I think that's going to be critical for us to be able to hold that moving average at least for today. Speaking of trends, it does feel like this is turning into a pattern with regard to the conflict in the Middle East. We're deescalating, then we're back at escalation. Uh what should we watch on this front? I know earlier this week you talked about uh WTI and where to look there. I believe it was around 890. What should we be watching today? >> Well, I mean the technical structure continues to align with a lot of the fundamental news that's coming out and that's what's actually very interesting about this trade. We have seen a fade to the downside here over the last two weeks or so. But we did hit a key area of support yesterday. This upward trending line basically from the lows that we saw back in the about the end of June or so and we continue to make higher lows. So we have this ascending channel. We hit an area of support. We also hit the 50-day moving average and the volume weighted average price or the anchored volume weight weighted average price from February which is pretty much the start of this conflict here. So, all of that has some confluence here for some buying activity outside of what the news events were going to kind of show this morning. So, if you're kind of looking at a bounce back to the upside, you're looking at the 20-day moving average, which is in blue for WTI. That's around $9425. If we're able to get above that, Diane, you're starting to talk about retesting that $100 or even that $105 level that we saw about a month ago. So uh this is a an interesting dynamic and the market actually has been kind of disconnected especially if you're looking at uh rates that actually has been a little bit disconnected from crude oil where oil has moved down but rates continue to stay elevated or even advancing higher. Now we're kind of getting that recorrelation if you will or that positive correlation between yields and energy prices and that's something that you don't really want to see from an equity standpoint. Last thing I also want to just kind of capstone NASDAQ S&P 500, yes, they're hitting all-time highs or near all-time highs. But if you look at the Russell this morning, uh we might actually see the Russell go back in or go into correction territory, meaning 10% off the highs that we have seen. So the overall market has not kind of repaired itself right now. There's still pockets of strength, especially in the tech trade. And energy is going to be a main driver for some of the other sectors that are more influenced by interest rates. >> Okay. Uh and let's talk about uh some of the earnings that you're across Applied Digital. Uh it was higher earlier when I checked. Where do things stand now? What are some of your takeaways? >> Yeah, we did actually see a remarkable earnings announcement. Now, this is kind of a volatile name when you're looking at the earnings, and the market was actually expecting a pretty big loss uh when it comes to the adjusted earnings per share, but they were able to exceed the expectations when it came to revenue. That actually came in at 341.9 million for the quarter. She was looking for around 124 a.5 million. So that's around a 322% increase on a year-over-year basis. Now note this used to be a crypto name that's kind of repurposing itself into the data center space or the AI space. So they are actually starting to monetize uh some of their business here. The services revenue did see a 225% increase on a year-over-year basis. And the ten tenant fit out services business uh did uh generate around $157.2 $2 million worth of revenue here. So, the company is starting to see uh some demand actually picking up especially in their uh the the in the north where they have the the bulk of their uh data centers. So, uh seeing some positive growth there that actually should be a tailwind for another company like a coreweave for that matter or others that are trying to build out these data centers and host other companies uh and and be able to provide those services and this is kind of showing that that trend is actually continuing. Now, we still would like to see this company generate a positive adjusted earnings per share. There's still some cash burn that is taking place, but we are seeing some topline revenue. And at this rate, you could get a little bit more optimistic around this name, which has kind of gotten beaten up over the last year. >> All right. Uh let's cross over to another earnings uh mover or earnings name, I should say. It wasn't moving that much when I uh checked earlier. Um Pepsi, it's out with its results. looks like it beat expectations, but it doesn't look like it's completely out of the woods in terms of any adjustments it needs to make around consumer patterns. What's the latest here? >> So, the consumer patterns continue to be relatively weak, especially here in North America, but the company is actually announcing that additional cuts uh could actually improve their margins over time, which is why we are seeing the stock up about $2 from the closing price of yesterday. Now, the core EPS actually came in at $2.34 was looking for $2.30, 30 cents. So, they were able to exceed the that metric there. And revenue came in at 25.27 billion. She was looking for 24.96 billion. So, about 5.6% growth on a year-over-year basis. Now, organic revenue did actually accelerate. That's actually a positive sign there, but it's not because of North America. It's really because of their international sales. They did cut their core EPS guidance moving forward as well. and they did actually revise their organic revenue and narrow that to around 3% growth uh moving forward and that's actually uh a little bit of an improvement from what we saw from uh the previous quarter as far as their guidance. Now once again they are looking to continue to cut cost. If they are able to cut cost they are going to be able to improve margins but they did cut a significant amount of products as far as their own prices and they are not seeing the relative impact or the relative increase in volume here in the United States. That is a little bit of a concern and then you start questioning maybe some of the other companies within the space like a Coca-Cola or even a General Mills for that matter. Are they going to see the same type of impact which could also once again squeeze margins and also uh impact their equity performance. So overall I would say it was not the best quarter when it comes to the numbers but the outlook and the commentary around cutting cost is why we are seeing a little bit of a bump in shares this morning. And one of the things that I I think is interesting is where they are seeing uh demand shift. It just goes to show kind of sign of the times in terms of consumer appetites. I mean one of the conversations I know we've been having generally speaking on our air is about some consumers trading down. But at the same time you have the effect of the GLP1. So, you know, it was areas like where they saw, you know, Doritos protein, which that seems wild to me, uh, protein Doritos, but I know they also have their other brands where they strip out some of the additives and those are doing better better. And then on beverage, it's the low sugar Gatorade, uh, zero sugar stuff that's, uh, doing better. So, it'll be interesting to see how much more they lean into that. Also, how long that's sustained in terms of American appetites. Um, but let's pivot. Let's talk this non-earnings mover, Wolf Speed. That's been off to the races this morning. Uh quite a different story than uh July of 2025 in terms of Wolf Speed, but obviously there's some contingencies here. What's the latest? >> Yeah, so Wolf Speed, they actually design and manufacture silicon carbide and this is actually needed in order to uh produce chips um that are able to perform in high voltage environments as well as having power efficiency. So this is really what they are known for. But they are actually uh citing a deal with the US Department of War's Office of Strategic Capital. And this is going to be around a $ 1.5 billion long-term deal here. This is in order to ramp up production of the silicon carbide materials in order to once again power some of the uh technologies that the Department of War or the Department of Defense utilizes within their operations. Kind of reducing their dependence on China for uh receiving some of these resources here. Uh this also does include Wolfspeed issuing some warrants to the Department of War uh in order to get this deal across the finish line and the warrants are actually going to be up to 7 and a half% of diluted equity. So that's very interesting deal but we are seeing the shares moving a little bit higher and this just shows that the the government is trying to allocate resources in a way that kind of boosts domestic production in order to fulfill their needs and try to reduce their reliance on outside factors or company or countries like China that's kind of holding up some of the critical minerals and metals needed in order to produce some of these uh you know these semiconductors that are needed in our our systems our defense system. So, an interesting development here. We're seeing a nice little pop to the upside. Let's see if it's going to be able to hold. >> Uh yeah, I'm still in the habit of calling it the defense department as well. So, I get that. Uh let's talk about levels uh on the S&P 500. What are you watching in terms of flows to the upside and the downside? >> Yeah, to the upside 7,800 is where we are seeing the majority of the call flows. To the downside, the puts that are actually seeing the most volume right now is the 7750s, but keep your eye out on the 7720 level. Uh that's where we see the majority of the gamma exposure at least for this morning on the volume front. What's actually really remarkable Diane is we continue to see kind of a pullback. We had a pullback of over6% 7% for the S&P 500 futures and volatility is still below the 16 level. So there's still a disconnect here that kind of just signifies that the mega cap names are still holding this market up. And if that trend does continue, maybe we continue to see kind of these intraday rotations from this broadening out narrative that we saw earlier this week to more technology specific uh sectors outperforming. >> All right, thank you KG. That is Kevin Green, our senior markets correspondent with your setup for today's trading day.