Morning Briefing
Published
S&P 500 futures point to a lower open, down 0.2%, as the Hormuz crisis enters a second day without a diplomatic resolution and the AI governance debate that fractured technology stocks on Monday carries over into Tuesday's session.
The energy picture has grown more complicated overnight. The oil tanker Elgaia is being towed to an Omani port after an attack off the Omani coast damaged its engine room, and Iran's Islamic Revolutionary Guard Corps claims to have shot down a fourth MQ-1 drone in four days near the Strait of Hormuz using a new air defense system. Saudi Arabia's East-West Pipeline, which carried 4 to 5 million barrels per day as the kingdom's Hormuz bypass, remains offline after drone strikes hit two pump stations on September 10, with full repair estimates ranging from three weeks to six to eight weeks. WTI is near $102 a barrel and Brent rose 0.7% overnight. Iran's foreign minister is due to visit China on September 16, but Iran's top security official Rezaee says the country will not engage with the US until its conditions are fully met, describing Trump's signals as mixed. Trump stated Sunday that Iran wants to make a deal "quickly and badly" and confirmed oil is flowing through Hormuz, while also announcing a mutual Russia-Ukraine agreement to halt strikes on energy infrastructure. The 10-year Treasury yield is holding near 5%, a level not seen since 2023, with traders pricing roughly 95% odds of a Fed rate hike at Wednesday's decision.
The AI governance debate remains the equity market's other central pressure point. Monday's session saw a sharp split between cybersecurity and software, which surged, and semiconductor and hardware names, which fell sharply after major tech companies called for an AI slowdown. That rotation is partially reversing in pre-market: semiconductor stocks are recovering modestly, with chip equipment names including Applied Materials up 1.6%, Lam Research up 1.6%, and KLA Corp up 1.7%, while software names that led Monday's rally are giving back ground. Wells Fargo downgrades the US technology sector to equal weight from overweight. Software-linked names dominate the pre-market losers, with Accenture off 2.1% and Salesforce down 1.7%. Coinbase falls 4.7% and Strategy Inc drops 3.8%, consistent with broader risk-off pressure on crypto-linked equities. Axon Enterprise drops 3.3% after announcing a $1.0 billion convertible note offering. ASML rises 3.0%.
On AI policy, Trump AI Czar David Sacks calls for transparency and audits of AI labs while opposing government control over the pace of development. House Speaker Johnson plans to meet AI executives by end of the week or early next week, and Senate aides say lawmakers are debating whether to require companies to commit to preventing catastrophic outcomes. China's Ministry of Industry and Information Technology says it will boost domestic AI chip design and computing technology. MediaTek announces a new AI phone chip designed to reduce memory usage during the current supply shortage.
Company News
- Aon launches a seven-part US dollar bond sale to fund its acquisition of USI. Aon is up 1.1% pre-market.
- Enbridge raises approximately CDN$3.0 billion through a bought-deal equity offering of 44.7 million common shares priced at CDN$66.85 per share.
- The Dell family office's Sequence unit agrees to acquire Baldwin at $32.50 per share.
- Rocket Lab completes financing for its pending acquisition of Iridium Communications, raising approximately $1.944 billion through an at-the-market equity program, and terminates its $3.6 billion bridge loan commitment. Rocket Lab is up 2.1% pre-market.
- Truist Financial agrees to sell $5.5 billion of auto loans representing substantially all of Regional Acceptance Corporation's assets, expecting $5.2 billion in net proceeds and $945 million of CET1 capital creation, as part of a strategic exit from near-prime auto lending.
- Transocean secures a two-well contract in Equatorial Guinea expected to contribute approximately $80 million in backlog, with work starting in 2027. Transocean is up 1.1% pre-market.
- OpenAI acquires Glass Imaging, a smartphone camera technology startup, in a deal valued above $300 million.
- Abbott Laboratories agrees to pay $385 million to resolve US and state claims over manufacturing practices at two facilities, including its Sturgis, Michigan infant formula plant, without admitting fault.
- lululemon athletica names Heidi O'Neill as CEO effective September 8, ending the interim co-CEO arrangement.
- Grab agrees to acquire a 60% stake in Atome Financial for $1.49 billion in cash.
- TransDigm prices $3.0 billion of 6.75% Senior Secured Notes due 2035, upsized from a planned $2.5 billion, to fund a tender offer on its existing 2028 notes.
- Oracle begins a new round of layoffs, according to an insider. Oracle is down 0.8% pre-market.
- Dominion Energy and NextEra Energy announce an enhanced Virginia benefits package tied to their pending combination, extending residential bill credits from two to four years and adding a $100 million workforce development fund, with the deal still expected to close in the second half of 2027.
Overseas Data
Asian equity markets slipped overnight as Monday's semiconductor selloff weighed on the region. The MSCI Asia Pacific Index fell 0.1%, with Japan and South Korea edging lower after the Philadelphia Semiconductor Index fell 5.9% on Monday. The South Korean won weakened 0.8% against the dollar, trailing other Asian emerging-market peers, and the dollar rose to 155.08 yen, a fresh one-week high. China's used home prices fell 0.31% month-over-month in August, a slightly larger decline than the 0.29% drop in July, while new home prices fell 0.17%, a modest improvement from the 0.18% decline in July.
Spain's August core inflation rose 0.3% month-over-month, reversing sharply from -0.1% the prior month, with the annual rate steady at 2.9%. UK energy bills are expected to rise 25%, adding direct inflationary pressure from the Hormuz supply disruption. Traders are pricing four quarter-point ECB rate increases by the end of 2027 and five Bank of England hikes over the same horizon. Ukraine struck Russia's Syzran oil refinery overnight, adding another supply-side disruption to an already pressured energy market. NATO fighter jets downed an unknown drone that crossed into Lithuania from Belarus, the second such intercept in two days.