Good morning investors,
The market shrugged off the drama in the Strait of Hormuz and pushed to fresh records. The S&P 500 rose 1.1% to a new all-time high. The Nasdaq surged 1.6% to its own record close. The Dow gained 0.7% and is now inches away from exiting correction territory.
This morning, futures are pulling back. S&P 500 futures have slipped 0.6%. Nasdaq 100 futures have fallen 0.6%. Dow futures are down 310 points or 0.6%.
The overnight moves reflect some notable earnings disappointments. IBM is trading down 6% after its results. ServiceNow has dropped 13%. Tesla initially rose on its earnings beat but gave back gains after Elon Musk warned that capital expenditures would rise "substantially" as the company pushes deeper into AI and robotics.
Opening Bell
The extended ceasefire continues to provide cover for equities even as oil markets tell a different story.
Iran's navy seized two container ships in the Strait of Hormuz yesterday. Vice President Vance's trip to Pakistan for peace talks remains on hold due to lack of commitment from Tehran. Iranian state media continues to call negotiations a "waste of time."
Yet the S&P 500 printed another record.
This divergence between stock and oil market reactions to the same news has been one of the defining features of this rally. Equity investors are treating any pause in active conflict as resolution. Oil traders, who must deal with physical supply constraints, are far less optimistic.
At some point, one of these markets will be proven correct. For now, the stock market continues to give the benefit of the doubt.
Today brings a heavy earnings slate including Intel, American Express, Blackstone, Honeywell, Lockheed Martin, and many others. Economic data includes initial jobless claims and the preliminary April readings on manufacturing and services PMI.
Earnings Season Remains Strong
The fundamental backdrop continues to support the rally.
Of the 87 S&P 500 companies that have reported so far, 81% have beaten earnings estimates and 76% have exceeded revenue expectations. That is a strong showing, particularly given the geopolitical uncertainty of the past two months.
The key observation is that businesses are finding ways to navigate the noise and deliver profit growth despite elevated energy costs, supply chain disruptions, and consumer uncertainty. Earnings estimates continue to rise even as headlines generate anxiety.
This is the tension that has defined 2026. The macro environment feels uncertain. The headlines are dramatic. But corporate earnings are coming through, and that is ultimately what drives stock prices over the medium term.
Tesla: Beat on Earnings, Questions Remain
Tesla reported after the bell and delivered a mixed quarter.
Earnings came in at $0.41 per share versus the $0.37 expected. Revenue of $22.39 billion missed the $22.64 billion consensus but still grew 16% year over year. Automotive gross margins improved to 19.2%, the strongest print in over a year, though still well below the 26.5% peak from 2021.
The quarter included one-time benefits from warranty adjustments and tariff-related items that Tesla disclosed without providing specific dollar figures. The underlying margin improvement is real but harder to quantify than the headline suggests.
Deliveries came in at 358,023, below estimates of roughly 366,000. Tesla characterized the gap as demand to clear rather than inventory overhang, noting its highest order backlog in over two years.
None of that was what Musk wanted to discuss.
"We're going to be substantially increasing our investments in the future," Musk said. "So you should expect to see a significant, very significant increase in capital expenditures."
Capital spending is guided above $20 billion for 2026 to fund six factories, AI infrastructure, robotaxi deployment, the Optimus humanoid robot program, and a new semiconductor research fab in Austin. First quarter free cash flow was positive at $1.44 billion, but the spending ramp will pressure that trajectory for the rest of the year.
On Optimus, Musk made his boldest claim yet: "Optimus will be our biggest product. Not just Tesla's biggest product ever, but probably the biggest product ever."
The stock rose initially after the earnings release but gave back gains during the call as investors processed the capital intensity implications. Shares traded near $387 in overnight action, down roughly 2% from the after-hours high.
My Take on Tesla
This was a split print. Earnings beat. Margins improved. But revenue came in light and the core auto business remains under pressure.
Competition continues to intensify, particularly from lower-cost, higher-spec competitors globally. Tesla is responding by introducing more affordable trims of Model 3 and Model Y, which suggests pricing remains a key lever to drive volume.
The bigger story is strategic. Tesla continues to shift the narrative away from cars and toward autonomy, AI, and robotics. Robotaxi expansion into Dallas and Houston is a step forward, but scale remains unclear. The company still provides limited visibility into fleet size, utilization, or unit economics.
That leaves investors focused on direction rather than data.
Energy, which had been a consistent bright spot, declined year over year this quarter. That introduces near-term variability into what had been a key diversification story.
The market reaction reflects the balance of these factors. The auto business is stabilizing, but the valuation depends on autonomy and AI scaling successfully. Until those businesses reach meaningful revenue contribution, the story remains transitional.
I continue to view Tesla as a show-me situation. The potential is enormous if the robotaxi and Optimus programs deliver. The risk is that massive capital spending produces returns more slowly than the valuation implies.
Taiwan Surpasses the UK
Here is a statistic that captures the AI era in a single data point.
Taiwan's total stock market capitalization has reached $4.14 trillion, surpassing the United Kingdom's $4.09 trillion for the first time in history.
Taiwan's market has tripled since 2020, driven almost entirely by the AI-fueled surge in semiconductor stocks. Taiwan Semiconductor, which makes up more than 40% of the country's total market value, has surged 680% over that period and trades near all-time highs.
By comparison, the UK market remains roughly in line with its 2013 peak and pre-financial crisis highs. Foreign investors purchased $8.9 billion of Taiwanese shares so far in April, putting the country on track for its largest monthly inflow on record.
AI is reshaping the global investment landscape. The winners in this cycle are not the traditional financial centers but the companies and countries that control the infrastructure layer.
The Generational Wealth Gap Widens
Another striking data point deserves attention.
Americans aged 70 and older now hold a record 17% of all US equities and mutual fund shares outstanding. That percentage has tripled since the 2008 financial crisis low.
At the same time, Americans under 40 own just 3%, in line with 2003 levels and half of what it was in the late 1980s.
The gap between these two cohorts is now approximately 14 percentage points, the widest on record. At the start of the 1990s, that gap was just 6 percentage points.
This is the consequence of asset inflation over the past four decades. Those who owned equities before the great bull markets began have seen their wealth compound dramatically. Those who entered the workforce after 2000, facing higher costs of living, student debt, and elevated asset prices, have struggled to accumulate ownership stakes.
The implication for markets is that equity ownership is increasingly concentrated among an older demographic with different risk tolerances, time horizons, and spending patterns than younger investors. This shapes everything from market volatility to consumption patterns to political priorities.
My Assessment
The rally continues, but I remain cautious about chasing at these levels.
Yesterday's session pushed both the S&P 500 and Nasdaq to new all-time highs. The fundamental backdrop is supportive. Earnings are beating. The ceasefire is holding. Investor sentiment remains constructive.
But the market has come a long way very fast. From the March 30 lows, we have seen one of the most powerful rallies in history. At some point, consolidation is not just likely but healthy.
This morning's futures pullback may be the beginning of that process, or it may reverse by the open. Either way, I continue to believe the prudent approach is to let the market come to you rather than chasing extended moves, unless you have a long term time horizon.
The bull market is intact. My year-end target remains approximately 10% higher on the S&P 500. But the path between here and there will not be a straight line.
Final Thought
Earnings season is reinforcing the fundamental case for equities. Companies are navigating uncertainty and delivering profit growth. That matters more than any single headline.
At the same time, valuations are not cheap and positioning has become extended after three weeks of relentless buying. The setup favors patience over aggression.
Stay disciplined. The playbook continues to work.
As always, feel free to reach out with questions about navigating this environment.
Best regards,
Dan Sheehan [email protected]
Subscribe: https://substack.com/@dansheehan3
This newsletter is for informational purposes only and should not be considered as investment advice. Please consult with your financial advisor about your specific situation.