By Logan Gilland, CFP®
Seven weddings. That’s what the Gilland household has on the calendar this year, and we are officially underway. I’m kicking off the season as a groomsman this weekend, and like pretty much everything in my life, cue my wife’s eye roll, it becomes a financial analogy. Bear with me.
Monday–Tuesday: Dry Chicken and Cold Mashed Potatoes
Every wedding season has that one early reception where the food is just… fine. Not bad enough to complain about, but not good enough to get excited either. That was the market to start the week.
We were sitting in something of a news vacuum. Iran headlines weren’t encouraging, the Trump-Xi meeting last week produced little, and the market was still digesting higher-than-expected inflation data. The tape reflected it. Nobody was getting up to dance.
Wednesday: The DJ Nailed It
You know the moment. The DJ throws on that one song and suddenly the whole room is on the floor. Great Balls of Fire is my personal favorite. Wednesday was that moment.
A potential Iranian nuclear deal came back to the table, which we’ve heard before. However this time, satellite footage confirmed actual ships moving through the Strait of Hormuz for the first time in weeks. That was more than just talk. Oil fell sharply. Stocks rallied significantly. The dance floor filled up.
Nvidia: The Last Wedding of the Season
Wednesday night brought Nvidia earnings and they were a blowout in comparison to their historical. Revenue hit $81.6 billion, up 85% year over year. Their financials seem to point to the market saying, “AI is not going anywhere.”
But here’s the thing: this Nvidia report felt like the last wedding of a long season. Everyone’s already been to six great ones. The food is excellent, the DJ is perfect, and the happy couple is lovely but that is all anticipated. The expectations were so high that even a record quarter couldn’t move the needle, because perfection was already priced in. Nvidia finished the week down around 6%, even as the S&P 500 ended positive.
Walmart: Even the Best Caterer Has an Off Night
For our wedding, we hired Cracker Barrel for breakfast. It was great but even the best caterers have a hiccup or two on the big day and that worries me for the not so great ones.
Walmart beat on revenue $177 billion, ahead of expectations but issued weaker-than-expected guidance and flagged significant pressure from elevated fuel costs. The stock finished the week down about 8%.
Here’s why that matters beyond just one retailer: Walmart is known to have one of the best logistics and best processes of any retailer in the country. If they’re absorbing $175 million in additional fuel costs and warning about what’s ahead, imagine what the smaller operations may be dealing with. Hence why the situation in Iran carries such significant weight right now.
The domino effect is real. Higher fuel costs feed higher inflation. Higher inflation means the Fed may be pushed to stay higher for longer. Higher benchmark rates tend to push Treasury yields up, the 30-year Treasury hit a 19-year high this week. Higher Treasury yields often mean higher borrowing costs for businesses, which could squeeze margins, which ultimately pressures stock prices. One domino can set off a long chain.
How the Week Finished
Despite all of it, the market closed positive for the week. The Iran optimism carried real momentum through the back half of the week. It wasn’t a clean week though; Nvidia sold off, Walmart warned about the consumer, and bonds were under pressure.
Markets try to be forward-looking, though, so I believe they’re currently leaning on the hope that the Iran domino tips the right direction. One wedding down. Six to go. Let’s see how the season unfolds.
Talk again soon.