Dip Buyers Are Running Back to Stocks Despite $100 Oil

The reflex to buy stocks is kicking back into gear.

Market Snapshot

Brent crude oil futures	$104.02	+2.1%
S&P 500 futures	7,134.00	-0.5%
Stoxx Europe 600 Index	611.11	-0.5%
South Korea Kospi Index	6,475.81	+0.9%
US 10-year Treasury yield	4.32%	+0.02

Market data as of 05:28 AM ET. Data is subject to provider delays.

Five things you need to know

A record-breaking rally in US stocks came to a halt as peace talks in the Middle East remained in limbo, sending Brent crude further above $100 a barrel.
Tesla is slipping 2.3% in premarket trading after the EV maker said it anticipates billions of dollars in additional spending this year to support Elon Musk’s AI and robotics ambitions.
Texas Instruments surges 12%. The chipmaker gave a surprisingly strong forecast, helped by booming spending on data centers and industrial equipment.
Business activity in the euro area unexpectedly shrank for the first time since late 2024 due to a steep drop in the services sector as the Iran war weighs on consumers.
Nestlé gains 7%. The Swiss foodmaker showed resilient sales growth in the first quarter, led by strength in coffee and snacks.

Defiant rally, explained

Almost two months into the conflict in Iran, global stock markets are staging a defiant rally. From the US to Taiwan and South Korea, a disconnect has emerged: While tensions remain high, equities are charging back toward all-time highs.

Here are the five reasons why there hasn’t been a more negative reaction to the conflict:

Peak Uncertainty: Analysts believe the US and Iran want to find an offramp from the conflict. After Trump’s extension of the ceasefire, there’s clear evidence that diplomacy is the likely end game.
Dip-Buying Mentality: Many investors are referring to the Ukraine-war playbook from early 2022, when an initial equities selloff soon reverted to business as usual. Years of headline-driven volatility and a dip-buying mindset have reinforced investors’ reluctance to stay bearish for too long.
Oil Cushion: Record releases from strategic petroleum reserves, some spare capacity among major oil producers and demand destruction have so far cushioned the war’s effect on oil supplies. Prolonged disruptions in the Strait of Hormuz could still escalate into more severe consequences.
Robust Earnings: Company earnings have given markets a much-needed shot in the arm. Almost 80% of the S&P 500 companies reporting first-quarter results so far have beaten estimates. A number of brokers have already revised up their growth estimates for the year.
AI Is Back: Technology shares have been the major driving force behind the stock rally thanks to solid AI demand. One example: SK Hynix Inc. today reported a five-fold jump in profit as the South Korean memory-chip maker reiterated plans to ratchet up its spending.

“Markets may be applying the ‘transitory’ principle to a situation that will continue to work its way through the system over a prolonged period of time,” said Magdalena Polan at PGIM Fixed Income. “Investors are continuing to focus on global liquidity, adopting a glass-half-full read of fundamentals.” —Winnie Hsu and Ruth Carson

On the move

Semiconductor stocks rally in premarket trading on the Texas Instruments results, with Analog Devices up 4.7%, ON Semiconductor +4.4%, NXP Semiconductors +4.1%.
ServiceNow tumbles 13% after the software company cut its margin forecast. The company said some deals have been delayed by the war in the Middle East. Salesforce -5%, Atlassian -6.8%, HubSpot -5.8%.
Lululemon Athletica sinks 4.6%. The athletic retailer named former Nike executive Heidi O’Neill as its new CEO in an effort to move beyond a turbulent period of slowing growth and investor unrest.
IBM slips 6.9% as its earnings report failed to assuage investor concerns about AI disruption.
CSX gains 6.3% on earnings that beat estimates.
Southwest Airlines falls 2.2%. Profit fell just shy of expectations.
Earnings are due before the bell from Nasdaq, American Express, Union Pacific, American Airlines, Lockheed Martin, Honeywell, Blackstone and Comcast. Meanwhile, Newmont and Intel are due after the close. —Subrat Patnaik

Consumer gloom

Another disconnect in this stock rally: Even as Wall Street touches record highs, individual Americans are struggling to catch up.

Consumer sentiment this month sank to an all-time low, with Americans increasingly worried about mounting inflation driven by the war. The divide has reached a critical juncture where investors need to question how much further sentiment can worsen before it starts to erode the S&P 500 Index’s earnings power.

“The consumer remains the bedrock of the US economy, so any deterioration there is ultimately a risk to equities,” said Noah Weisberger of BCA Research. —Joel Leon and Peyton Forte

Word from Wall Street

“It’s hard to imagine this is really over in the next few days or even the next few weeks. It could still be pretty messy. I think we’re probably going to get a little choppy — a consolidation pattern, maybe through the summer.”

Ed Yardeni

Chief investment strategist, Yardeni Research

Yardeni, who correctly called the market bottom last month, says the Iran war will limit the market’s gains until it’s resolved.