Oil up 10% on the week; the Fed meets next

Good morning. After Thursday's big drop, Friday's trading was a bid to catch a breath. The Magnificent Seven lost about $800 billion in market value in a single day, so a bounce was on the cards, and oil easing 4% on the day helped. Over the whole week, though, oil is up 10%.

The root of the unease is the Middle East. President Trump is weighing an unprecedented large-scale strike on Iran, and Houthi attacks on Saudi tankers have made the Red Sea a new front. On the prediction market Kalshi, the odds that Hormuz returns to normal by July 2027 fell from 70% to 47%, meaning it could take a year or more.

AI spending worries piled on. When Alphabet raised its capex plans, fears grew that other tech giants will follow, pushing up yields and widening credit spreads on Google, Amazon and Meta debt. With the S&P 500 now below its 50-day average, veterans like Ed Yardeni call it a classic buying opportunity, while others point to the 30-year yield nearing 5.2% as a risk.

So the big event next week is the Fed. It is the first FOMC under new Chair Warsh, and a hold is widely expected. What matters is whether he signals hikes ahead. Yardeni warned the Fed could need up to three.