Here are things going right for stocks despite new Iran war setbacks

When the stock market opens on Monday, we will once again be faced with the interaction between bonds and oil. Over the weekend, we saw the collapse of the Strait of Hormuz opening agreement and President Donald Trump's growing desire to return to bombing mode. I read that there are no more targets and I find such articles to be ignorant. There are real targets regarding infrastructure in Iran that Trump is reluctant to hit but may feel he has to press to bankrupt Iran, perhaps causing food riots that always precede regime change. None of us know what will happen, and so far predicting the outcome has been extremely dangerous and has not yielded anything investable. But what makes it investable, or at least useful, is the near-constant scrutiny of the bond market. It was tremendous foresight that returns were stable, with only slight changes to the downside. (Remember, bond prices and yields move in opposite directions. So when people buy bonds, yields fall, and when people sell bonds, yields rise. Low bond yields tend to support stocks.) Friday's big stock rally had as much to do with falling bond yields as it did with the decline in oil. If yields hold steady on Monday despite the rise in crude oil, then we won't see as much pressure on our stocks as expected. The stock market is still incredibly overbought at a positive 7.89% according to my trusty momentum indicator, the S&P Short Range Oscillator. This is negative because we never like to see such sharp swings in either direction. However, Oscillator history shows that stocks do not tend to fall sharply from these highs and instead break through these levels over time. Again, something that should encourage the bulls. To me, a stable bond market means you can actually focus on earnings at hand, apart from companies directly impacted by oil (airlines and their derivatives, including corporate name Boeing and GE Aerospace, as well as travel and entertainment companies like Marriott and Disney). If that's the case, we shouldn't be as stressed as we would normally expect. One of the brightest signs of the market this past week, a sign I don't expect to change, is the re-ignition of the "Magnificent Seven" megacap tech stocks as a force to be reckoned with. We have six of them: Alphabet, Amazon, Apple, Meta Platforms, Microsoft and Nvidia. We do not own Tesla. Until the last 10 days, we thought that these companies were spending too much on equipment and their balance sheets were too stretched to avoid being left behind in the AI arms race. What has changed? It's something that isn't talked about enough, but needs to be focused on if we're going to make money in the next leg of the stock market: the market's reluctant acceptance that the Mag 7 has a lot more firepower than we thought. While we haven't heard anyone other than Nvidia CEO Jensen Huang say anything about it, they're starting to reap the rewards of their spending. This is the real reason for Oracle stock's resurgence. That's why Marvell Technology and Club's name Broadcom roared. This is the power behind neo-cloud CoreWeave and cloud infrastructure partner Vertiv. And of course, that's why Nvidia has made some progress over other Mag 7 names. This may be why Microsoft is trying to catch up, but it may be a bit difficult. We will see. The entire collapse of the Magnificent Seven occurred because they no longer had the balance sheets to finance themselves. The emergence of Mag 7 took place during the mini-banking crisis of March 2023, when the loans of many companies were frozen. These companies did not need loans. They had cash. As long as that's the case, these stocks can continue to rise. But when they had to come to the bond market because they didn't have enough money to build or finance the power and data centers they needed, they became, better put, "average" stocks that rose or fell with the flow of funds in and out of the S&P 500. It would be great if all of these companies explained that not only do they need to spend to keep up, but that they can do so because their other businesses are so solid. For some reason they didn't want to do this. Think of it this way: Alphabet's Google, YouTube, and Google Cloud are splashing money. The same goes for Amazon Web Services (AWS) and Amazon Prime. Tesla is now a technology company and the market will give it all the money it needs. Apple doesn't need to spend any money; He is a free rider. Microsoft has the money to do something special beyond Copilot. Meta has some sort of new, winning strategy that the market thinks will yield profits. And let's not forget that Nvidia's next-generation chip platform, Vera Rubin, is sold out. We've also seen the emergence of Anthropic and OpenAI, which have lost huge amounts of money but at least now have hope of endless funding from both institutions and the public. OpenAI uses Oracle and CoreWeave, as well as Microsoft's Azure cloud. Anthropic has a Google-backed deal with CoreWeave. Also, SpaceX will soon go public, which will provide more funding for this complex because xAI will need to build its infrastructure. Tesla's Elon Musk is behind SpaceX and xAI with Grok chatbot. All of them have no choice but to spend because this is a massive horse race where winners change regularly. Right now Anthropic's Claude model seems to have an advantage, but I wouldn't count out any of these companies given all sorts of nuances like retail for Amazon and traditional search for Alphabet and OpenAI's ChatGPT, as well as Meta's offerings. I am by no means giving you the full picture of what is going on in this universe. But all I can tell you is that the powerful nature of both OpenAI and Anthropic and their ability to raise money easily has reignited this group, and the profits they are now making from Nvidia spending and their own chip spending have turned this universe and all of its hardware into a positive rather than a negative for the market. Think about what's happening right now in technology, which is evolving from innovation to big business, creating a much more efficient world. We are on the verge of an explosion in artificial intelligence agents. The agent economy could eliminate much of the call center hiring, coder hiring, and analyst and research hiring we currently do. While these may mean a dramatic slowdown for enterprise software, they are real savings that are worth real profits for enterprise customers. You need a ton of compute to accomplish all this, and that means you need Nvidia's Vera Rubin chips. Intermediaries run on CPUs (central processing units) rather than GPUs (graphics processing units), so Intel, Advanced Micro Devices, and the newly added Bullpen stock Arm are pushing higher. I think Intel's comeback is real and I'm kicking myself for missing it. The company reported this week, and although it missed and got slaughtered last quarter, this time more analysts are eager to get behind it, not bury it. A revolution is taking place in the data center, moving from copper to fiber. We like Corning as a killer in the portfolio, but prefer Lumentum and Coherent to solve the optical interconnect issue caused by copper. Marvell is known as the third pillar of the optical alliance. All three are partners of Nvidia. There's still another wave of spending involving real energy growth: Club names GE Vernova and Eaton will benefit, as will Bloom Energy and Caterpillar, as well as the aforementioned CoreWeave and Vertiv. Beyond talking to CEOs and reading relevant research, I don't claim to be very knowledgeable about the technology involved. But my main focus here is to say that you just have to follow the money. The whole complex that was the fourth industrial revolution seemed to stall because we couldn't figure out where the money could come from. Now we see that coming from profits from earlier spending, the money that OpenAI and Anthropic continue to spend, and the next tranche coming from their IPOs and SpaceX offerings. No other part of the economy attracts this level of money. Fortunately, this reignition of the Mag 7 complex is much broader in scope than the two stocks that benefited most from the data center boom from March 2023 through September 2025, when Oracle and Nvidia peaked. Unfortunately, we do not have another spending center to take care of. Let's not forget that we are a consumer-oriented economy. Don't despair, though. As long as bond yields remain low, we will see the Fed at least tend to lower policy rates. Yes, inflation is still too high to justify multiple cuts. But as long as the economy slows, the Fed is on your side and can easily put an asterisk on oil and other commodities behind inflation and say it's temporary, even if the consumer decline isn't. Too pink? All I can say is that we can repeal some of the gains we've made in the stock market over the last two weeks; But if we do this, buyers will come to the surface, and if you stay for a long time, you will not be alone. 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