Markets, earnings and oil risks shape the outlook 5/7/26

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 More green on the screen, after Wall Street's best day and a month,
 I'm Dominic Chiu, and this is your morning call.
 Top of the morning to you, I'm Dominic Chiu, in for Morgan Brennan this morning.
 Let's check on U.S. equity futures because we are seeing some upside
 with the S&P, the Nasdaq, and Russell 2000 small cap index,
 hitting record highs in yesterday's session.
 Right now for the major indices, the Dow's implied higher by a modest 50 points,
 the S&P up by about three, and the tech heavier Nasdaq 100 up by about 13 points.
 On the treasury side of things, interest rates still in focus with the benchmark 10-year note yield,
 rising in price and falling in yields as of this moment here, 4.336 percent on the 10-year note yield,
 the 2-year note yield, 3.851 percent, and the 30-year long bond, just about 4.928 percent.
 Whip saw moves in energy so far this morning, but mostly to the downside.
 You can check out what's happening with U.S. benchmark oil prices at $92.99 off about 2 percent.
 The ice Brent crude futures down about 2 percent as well, $99.12.
 By the way, they were down much more earlier on today.
 We're seeing some of those losses evaporate, so we'll see how that trade plays out.
 And then watching the chip trade after AMD's monster day, monster yesterday,
 up more than 18 percent. And right now, you can see some of those shares, AMD,
 giving back a half of 1 percent, and then Nvidia, Broadcom, Intel, and Micron, relatively stable,
 given the price action we've seen over the course of the last few weeks.
 To the Middle East now, where Iran says it is reviewing a U.S. peace proposal,
 following multiple reports yesterday suggesting Washington and Tehran are closing in on a
 one-page memorandum to end the war, though President Trump says it might still be,
 quote, too soon to think more about face-to-face talks.
 Now, Dan Murphy is in Abu Dhabi with the latest on the state of play in the Middle East.
 Dan, what can you tell us about the optimism or relative pessimism? How are things shaking out?
 Well, Dom, oil and politics certainly front and center this morning as we see the U.S.
 and Iran reportedly edge in closer to a deal to end the war and reopen the Strait of Hormuz.
 The Wall Street Journal reporting this morning that both sides are now working through
 Pakistani mediators on a one-page framework that would open up a 30-day negotiation window,
 potentially beginning as early as next week in Islamabad.
 Now, these talks would focus on a moratorium on uranium enrichment,
 the release of frozen Iranian funds, and crucially as well restoring safe transit through the
 Strait. The prospect of a breakthrough has already sent crude prices tumbling. You can see here
 Brent dipping below 100 USD for the first time in weeks, but of course reality check here
 significant gaps still remain and diplomats also stress there's still no final agreement.
 In fact, reports say that there are disagreements over the scope of international inspections and
 the specific timeline for lifting the naval blockade on Iranian ports as well. Either way,
 President Trump certainly keeping up the pressure he has been warning that if Tehran rejects this
 memo, then the U.S. will resume operation epic fury at a much higher level and intensity than before.
 Meanwhile, Dom, this diplomatic push also coming as we get new details starting to emerge about the
 U.S. decision to pause project freedom this week. That was that short-lived military operation to
 escort ships through the Strait. NBC News reporting today that the reversal came after Saudi Arabia
 suspended U.S. access to critical bases and airspace needed to carry out that mission.
 The Saudis basically sending a message that worked here saying its territory is off limits,
 and diplomacy should be the answer. Dom, finally in terms of the timeline here, the next 24-48
 hours are going to be critical in terms of getting a response from Iran,
 and all of this also happening ahead of President Trump's expected arrival in China to meet President
 Xi Jinping at exactly this time next week. So we're watching closely to see exactly what can
 happen within that timeframe. All right, Dan Murphy, live from Abu Dhabi. Thank you very much for
 the update there on Iran. Now, a peace deal optimism feeling right now,
 a sending stocks in Asia on a wild ride with the Nikkei doing something for the first time ever
 as Europe gets its trading day started. Ben Bulos is here in London with more Ben.
 Yeah, I'll give you the European picture at a moment. First, let's start with the focus in Asia
 because Japan's benchmark, Nikkei 225 index, sawed look at this nearly 6 percent in the session
 of Republic holiday lifting the rest of Asian equity markets. Soft bank shares extended gains
 as part of the catch-up trade amid the broader tech and AI fueled rally. Meanwhile, here in Europe,
 shares took a bit of a pause today. Traders watching, as you can see, not as much risk on sentiment,
 in fact, all of them below the flatline. Traders watching the Middle East peace prospects with caution
 while digesting the fallout from a flurry of key earnings this side of the pond.
 First quarter profit at Shell came in stronger than expected at $6.92 billion, as the energy
 major was boosted by surging crude prices in the wake of the Iran war. Shipping giant mask has
 backed its full-year guidance with first quarter operating profits, slightly beating estimates.
 The shipping firm said the conflict in the Middle East had a limited impact on the quarters
 realized financial results, but said it represented another wake-up call. With that,
 all right, Ben Boulou is there in London with the latest there. Thank you very much.
 Let's tie everything together now after the rally and global equity markets and a drop in energy
 prices over that optimism on a potential U.S.-Iran peace deal. Joining me now for this conversation
 is Storm Uru, co-head of the Global Innovation Team at Lion Trust Asset Management
 and Manager of the firm's Global Dividend Fund. Storm, thank you very much for joining us this morning.
 Let's talk from a portfolio manager's perspective just how much are you still being headline-driven
 in some of your decisions as opposed to being more strategic in terms of the fundamentals
 that you see? Well, don't say there's a great question to start this off. Look,
 market has been incredibly volatile now for around about 18 months, really headline-driven,
 but in the end of the day we're investing in companies and the great thing about volatility
 in the market, which has been driven by the headline, means that as active firm managers,
 if you're willing to make decisions on a day-to-day basis, trim when prices get a hit of fundamentals
 and buy when volatility hits certain areas of the market, then it creates tremendous
 opportunity for the longer term. These headline dynamics have created opportunities,
 but it's also, you need to be very, very active. All right, so I'm going to get to the decisions
 on your end in a moment. Have you seen any kind of behavioral change in your client base,
 the people that actually give you money to manage? Are they worried a little bit more? Are they
 relatively stable in column in this environment? How exactly are those clients treating those headlines?
 You're being more measured about it. I get it, you're a professional, you manage the money,
 but the people who give you the money have to be feeling something as well.
 Yeah, well, particularly after the last market cycle, which ended in 2021, where markets
 were really benign compared to how they are today. We have elevated vix on a continual basis,
 which has made an impact. I think from our perspective, clients are now starting to understand
 that the end of the day we're investing in great long-term opportunities and great businesses,
 but we may just need to stomach a bit more volatility in the shorter term. So,
 whilst two years ago, it was difficult for investors to take that leap of faith and investing in
 these new businesses that are leading the next cycle, our client base is now starting to become
 more comfortable with elevated volatility because the companies that are emerging both from revenue
 relics acceleration, operating leverage, driving the store market forward are just different
 to the companies that were driving the market forward five, six, seven years ago.
 It's just a different market environment, but you just really need to be
 really discriminatory around price. And so, what I mean by that is we're seeing
 parabolic moves, maybe in the moment seeing a memory later in the year, we'll see it somewhere else.
 For us, we're starting to trim in that part of the market and start to allocate to areas which
 have just been left behind this year, particularly in quality growth type companies.
 All right, so let's talk about what those names are. The volatility creates opportunity,
 especially in the downside of better prices. Where have you been buying?
 Yeah, so particularly with the Middle East and oil, where it's been moving, it's created
 opportunity, particularly in second derivative opportunities around travel and leisure,
 and also around luxury companies. So this is Europe, we're normally running into the U.S.
 market during periods of volatility, but the moment, we're actually starting to find opportunities
 in Europe. So, Safran, which provides the engines into the travel industry, and also companies
 like Alvi and Mate and Luxury Goods, these companies are durable growth companies have really
 benefited from years and years of compounding value for the end customer and for their investor.
 And it's very rare you get to buy these companies when stock prices have really,
 really depressed over a longer period of time. But that's a cyclical type of opportunity.
 We're also seeing opportunities in structural growth areas of the market. We were seeing
 reacceleration, so think of companies like Amazon and Google with cloud opportunities and
 CoEV. All right, so it sounds like reduction in certain hot parts of the semiconductor market,
 allocation to consumer discretionary. Stormuru, thank you very much. We appreciate it. We'll see you
 soon, sir. We've got a lot more to come here on morning call, including an earnings alert as
 shares of Dordak's surge ahead of the opening bell. We're going to dig into those numbers and why
 the surge next plus what to watch when McDonald's reports later on today and why it's doubling down
 on one critical global market. But first, we check in on the quantum stock trade and a first on
 CNBC interview with IonQ CEO. We got a very busy hour still ahead when morning call returns after this.
 This message comes from Viking committed to exploring the world and comfort journey through
 the heart of Europe on an elegant Viking longship with thoughtful service, destination focused
 dining and cultural enrichment on board and on shore. And every Viking voyage is all inclusive
 with no children and no casinos discover more at Viking.com
 All right, welcome back to morning call. Welcome back checking some of the stocks on
 the move this morning. Shares of Dordak are jumping on a strong Q1 earnings report as well as
 order growth guidance, the company citing its expansion in grocery, in retail and international
 markets for those results. But profit was weighed down by higher expenses and a program to help
 drivers deal with elevated fuel costs. A different story for arm shares, slumping despite a beat on
 the top and bottom lines, but revenue guidance for the current quarter just topped Wall Street
 expectations. Arm also says that the mobile market unit growth will be flat or slightly negative
 in fiscal 2027. Those arm shares down 6% in extended trading. We're going to hear more on those
 results by the way. When arm CEO Rene Haas joins the squawk on the street team at 9.50 a.m.
 Eastern time later on this morning. And an even bigger drop in shares of SNAP. Q1 results beating
 estimates, but the company providing a cautious sales guide in part on the revelation it no longer
 has a deal with AI startup perplexity. SNAP also citing headwinds from the war in Iran for some
 of that outlook, those SNAP shares, parent company of SNAP chat, down 10% in pre-market trading.
 And we are watching shares of Ion Q under pressure this morning. The self-proclaimed
 Nvidia player of the quantum industry out with results after the close yesterday. First quarter
 sales were up 55% on the year. Those RPOs, the remaining kind of performance obligations, the
 value of signed contracts for goods or services, not yet fully delivered, up more than 550%
 to $470 million. That's enough for the company to boost its full-year guidance. We're watching
 other quantum names kind of with that ripple effect as well. You can see their reggae, D-wave,
 defiance, the ETF there, quantum computing ink, qubit, all down, but not as much as Ion Q right now.
 So this is a ripple effect happening. Joining me now for a first on CNBC interview is Ion Q's CEO,
 Nikolo Demasi. Nikolo, thank you very much for joining us this morning here at a studio and for
 the early wake up call, of course. Let's talk a little bit about the momentum that we've seen.
 There has been so much investor interest in these quantum computing names, but on maybe some
 of the expectations that we'll see down the line. How exactly have your results coincided with
 some of those expectations as they've evolved over the course of the last couple of years?
 Sure. Well, Ion Q is the largest quantum company in history by any measure. We were the first
 public company in the category. We built the world's first quantum logic gate 30 years ago.
 We just published our blueprint, the first in-world history, for a full fall tolerant shovel-ready
 system. And we're very focused on meeting, beating, financial expectations every quarter in
 year and doing the same technically. We're also the world's first quantum platform company. So it's
 not just computing that we feel we're leading in. It's also quantum sensing, quantum networking,
 quantum security. These are all equally important for civilization as we know it, everything from
 next generation GPS to, of course, next generation cybersecurity. We have roughly doubled revenue
 every year. Sometimes we've tripled it. We were the first quantum company in the history to seven
 figures, eight figures in last year, nine figures of revenue. And so yesterday we uplifted guidance
 for the year after a, you know, astonishingly strong first quarter. We said, Momentum's great
 across the entire quantum platform. And as a result, we're expecting revenue once again to be, you know,
 about double last year, early in the year. Plenty of quarters still to go, obviously.
 Plenty of quarters, especially with a runway as long as what quantum computing is promising right now.
 I think for a lot of investors out there, it's a conceptual kind of feel that they have for quantum
 computing. They kind of understand a little bit about what it is, multi-dimensional, multi-level
 compute across different types of platforms. But at the same time, maybe there's a struggle to
 understand how you're able to monetize it now, who is spending on this kind of technology and
 equipment. And what exactly the projection is for that kind of spending going forward? It's a lot
 to unpack, but can you take us through what exactly I on cue and other quantum firms do right now?
 And what exactly they are going to do that gets people to pay you those nine figure revenue numbers?
 Sure. I mean, I don't know really what everyone else is doing, but I'll tell you what we're doing,
 which is, you know, we're, we're very focused on our commercial audience and of course our
 federal and government customers. We are already delivering what's called quantum
 advantage. So applications that are able to be run faster on our machines than you can on a GPU
 or a CPU, you know, 270 million dollars a revenue steer at the high end. This really is an
 incredible strategic and financial inflection point for our business. We were, we were obviously
 three, you know, half that size last year, maybe a third of the size the year before. I believe we
 will be the first company in the quantum sector to 10 figures of revenue, having been the first
 to seven, eight and nine figures of revenue. We were about 60 percent commercial in our revenue
 base is what we talked about last night, 35 percent international customers, 35 percent of our
 customers are buying multiple products from us. So increasingly we are selling quantum networks,
 quantum computers to partners like the Air Force Research Lab, you know, and other commercial
 customers on both sides of the Atlantic. And, you know, I'd say that the technology readiness level,
 the military talks about, you know, very high in our sensing product family. We're on submarines
 to satellites, as I say, quantum networking also, you know, increasingly a deployed technology
 both sides of the Atlantic. We're working on that both on the ground and up in space. And
 our quantum computers obviously are where actually a lot of the organic growth has come this year,
 which we talked about last night has been, you know, at least a hundred percent year on year. And
 that is system sales, cloud access and application sales to a very broad base of customers. It's
 material science, pharmaceuticals. We talked last night about oncology research. We talked about,
 of course, defense intelligence and logistics. And really we're seeing, you know, tremendous
 progress in our quantum algorithms, delivering that quantum, quantum advantage, not just in one area,
 but actually across every aspect of applied science. You headed off my next question, which is
 going to be, where are you seeing some of the biggest uptaken industries outside of the military.
 So you've answered that. My last question before I let you go here, we kind of understand
 the practical applications of things like artificial intelligence. And we understand the
 projection of what this thing could lead to in terms of maybe artificial general intelligence
 years down the line and everything. What exactly is the best way to describe how that quantum
 computing technology trajectory interfaces with artificial intelligence, either above or beyond it
 or how exactly it could work with it in the coming years. Sure. And look, we announced last year,
 World Quantum Day, April last year, that we were already helping classical machine learning,
 LOMs learn faster and reduce error rates, both in vertical, industrial AI applications and
 general LOMs. So you're going to see us save energy and speed up learning generally for classical
 machine learning algorithms. Unlike those, we are not a correlation engine that can hallucinate.
 And so I think there's going to be a lot of human and political enthusiasm for quantum computing
 because it keeps humans very much in charge. You're going to see hybrid workflows. We talked about
 hybrid, you know, classical machine learning GPU and quantum data centers. Some customers are
 coming towards us already for that. You're going to see hybrid workflows for a long time because
 we have classical input devices. It'll have to call our quantum computer and we have classical
 output devices, right? So that's what the world is. I think the broad comes and videos,
 AMDs are seeing us increasingly as, of course, partners. I'm building an ecosystem
 out of the day. We want to be the standard quantum ecosystem for sensing networking computing,
 software hard, we're full stack. Ultimately, we're going to actually be the end point of the
 computer revolution is how we think of it. You know, we're 80 years in, building CPUs, GPUs,
 taking advantage of nature itself to solve problems that otherwise can never be solved,
 but even the world's most powerful GPU data clusters is where quantum will be really quite soon.
 And it's coming soon that people think because we're spending more money and we're moving things
 to the left on our roadmap and that Q-Day event, cracking encryption. It's now coming in
 28-29. People thought just a year ago might have been in the 20-30s.
 It's a fascinating conversation, one I wish we had more time for. Please come back and see us
 again soon. Nikola Demasi, IONQ. Thank you very much. Thanks. All right. Well, straight ahead on
 the show, digging into Iran's war price pressures and why some companies are warning consumers to
 brace for higher prices while others are actually caching in. But first, we're watching shares
 of Zillow Group down despite a top and bottom line beat for its most recent order. Investors
 instead focusing on its residential revenues which came in just shy of expectations.
 Zillow shares right now down 5% in the extended trade. Morning call is back after this.
 This message comes from Viking, committed to exploring the world and comfort,
 journey through the heart of Europe on an elegant Viking longship with thoughtful service,
 destination focused dining, and cultural enrichment, on board and on shore,
 and every Viking voyage is all inclusive with no children and no casinos. Discover more at Viking.com.
 Welcome back to Morning call. We've got a marketplace for you. We're watching cloud companies,
 sources telling CNBC the European Union is weighing restricting use of US cloud platforms
 to process sensitive government data. The EU is expected to present the plan as part of a
 broader tech package later on this month. But those cloud companies generally speaking the
 extended trade up fractionally so far in the pre-market. The economic fallout from the Iran
 war is now spreading far beyond the gasoline pump and companies across the economy are warning
 that cost pressures are rising fast. This morning both whirlpool and good year are trading lower
 after reporting sharp hits to profits, tyker tied to weaker demand and those higher costs.
 Whirlpool slashed its full-year earnings outlook, suspended its dividend, and then warned consumers
 to expect more price hikes on appliances as soon as the summer, describing the current situation as a
 quote unquote recession level industry decline. The company says higher freight material and energy
 costs are squeezing margins as shoppers pull back on bigger ticket purchases. Meanwhile, on the good
 year side, it posted a quarterly loss as rising raw materials costs and slowing tire demand hit
 those results. The tire maker is also cutting jobs in Europe as it tries to offset mounting pressures.
 At the same time, airlines are sounding alarms over surging jet fuel costs. The Wall Street
 Journal says white house advisers are growing increasingly worried that rising airfare and fuel
 costs could become a major political problem heading into the midterm election cycle. The broader
 concern, companies are increasingly passing those higher costs directly onto those consumers.
 So from appliances to tires to airline tickets, the war isn't just a geopolitical story,
 it's becoming an inflation story right here at home with rising cost pressures now spreading
 across the real economy. But for those still looking for direct winners to offset this,
 look no further than say the industrial complex, energy, and then cyber security. All higher,
 generally speaking, as investors bet higher cyber defense spending and elevated oil prices
 are here to stay at least for now, so call it a stock pickers market. Still on deck for the show
 creating chaos, strong testimony from one former open AI exec on Sam Altman's leadership
 as the Elon Musk trial rolls on plus a good problem to have for anthropic and new comments from
 its CEO on expectations versus reality. Morning call continues after this commercial break.
 Jim Chenos David Einhorn, Mark Lazarie, and Orlando Bravo, plus
 and videos chief software architect Jonathan Ross for his insight on what's next for the AI
 industry. All proceeds go to Memorial Sloan Kettering's pediatric cancer fighting program.
 The Sone Conference is where Wall Street unites to fight childhood cancer.
 Particularly for more information, go to soneconference.org.
 I'm Dominic Chiuin from Morgan Brennan. Welcome back to morning call. US equity futures right now
 are to the upside. The Dow is implied higher by a modest though 50 points. The S&P up by about
 five points in the NASDAQ up by about 28. Also on the energy side of things, we are seeing weakness
 in oil prices, although not as bad as it was earlier in the session. US benchmark West Texas
 intermediate off by two and a half percent to $92.55 per barrel. Ice print crude futures,
 the world benchmark age now below $99 a barrel, $98.66 off by a similar percentage amount.
 Checking out some of this morning's latest headlines, new comments from Anthropics CEO on
 the company's explosive growth, speaking at its annual developer's conference Dario Amadez says
 Anthropic had planned to grow about 10 times as big this year, but its revenue and usage instead
 increased 80 fold in the first quarter on an annualized basis, which he says explains why it's
 been so hard to keep up with that demand. Meanwhile, meta in Alphabet's YouTube, reportedly asking
 a California judge to throw out a jury's verdict in a landmark social media addiction case.
 The jury had found the two libel determining that they were negligent in the design or operation
 of their respective platforms. From one legal battle to another, we've got OpenAI CEO Sam
 Altman's management style under the microscope during yesterday's proceedings in the Elon Musk trial.
 One of the company's former technology chiefs testifying Altman so distrust among top executives
 going so far as, quote unquote, creating chaos, but adding she wanted him to remain CEO and pushed
 for board members to give a full justification for ousting him back in 2023.
 And satellite intelligence provider Hawkeye pricing the IPO at the top end of its range at 26
 bucks per share that values the company at $2.4 billion. It will begin trading today on the
 New York Stock Exchange under the ticker, H-A-W-K. And the CDC says the US is closely monitoring US
 travelers that were on board a cruise ship that was hit by a huntivirus outbreak that so far
 claimed three lives. The New York Times had reported that people in at least three states were
 being monitored for potential infections after that cruise line outbreak. Well, it's been another
 volatile day in the energy markets for trading with prices moving higher in the overnight session
 in Asia, but then turning negative once Europe opened this morning. This is all after US
 benchmark WTI and Brent crude both slumped more than seven percent at one point yesterday
 on optimism over a possible end to the Iran war, although President Trump says it's too soon for
 face-to-face talks. And a senior Iranian official says the latest US proposal is more of a wish list
 than an actual reality. For more on all that, let's bring in Rebecca Babin,
 senior energy trader with CIBC wealth. Rebecca, just how I mean the headlines are the headlines,
 we've been dealing with them for two months now at this point. From an energy trader's perspective,
 just how much more or less are you reacting to these headlines at this stage of the war?
 So I think energy traders at this point are reacting less and you wouldn't look at the price
 action and really think that. But if you look at pure energy traders, the reaction function is
 less. We are less likely to trade the headlines and try to potentially buy a dip based on an over
 reaction and positioning like you're seeing today just because the headline flow and volatility has
 been so elevated. So I think what you're seeing today with this 10 percent move over the past two
 days really is a positioning unwind of the systematic community, which is CTAs, which came in
 max long into yesterday's headlines and had to unwind a tremendous amount of that positioning.
 And those types of accounts and trading accounts really the momentum feeds upon itself.
 And what we're missing, and this is what you're getting to, Dom, is the trader that would typically
 come in and say, wow, this is a really, we don't have a lot of detail here. Maybe I'll buy this dip
 because we might be over reacting. That trader has pulled back pretty significantly from the market
 just on the fact that the volatility doesn't really allow us to trade on fundamentals or
 have a good feel for it. So that's where you're seeing these air pockets, I think, of really
 significant moves without a lot of buffer from the traditional trading community.
 So it's interesting because that dampening of volatility as you say on a relative basis compared
 to what we saw two months ago. And that kind of movement around these commodity trading advisors,
 I mean, CTAs are momentum-driven computer models. With that in mind, what can you glean about
 what the future price action looks like if there is now this kind of dampening or pullback
 in certain types of these momentum trades? I think you can glean a couple of things.
 And the first and foremost, I think you can glean is that the market is dead set on the fact that
 we're going to normalization and that there's going to be a tremendous amount of crude available
 and that positioning reflects a desire to kind of unwind these longs and that we will overshoot
 potentially to the downside and underestimate impacts to the upside. So if you're looking at this
 from a risk-reward scenario, you might have said, okay, I've got 10 bucks a downside and 15 bucks
 of upside based on fundamentals. But with the systematic community and the way the
 market is traded, you might now say, I've got 15 bucks a downside, fundamentals aside,
 and maybe only five bucks of upside based on the way the market is psychologically trading
 around this and where the technicals are within the marketplace. So it shifts your mindset.
 The market has very much wanted to look through what is happening, look for the destination
 of resumption of flows without really recognizing the journey to get there over the next two months
 assuming we open very, the straight is open very soon is a much tighter market than where we are
 today. So you have to look at the journey versus the destination, this is a market that trades on
 the destination. All right, trading on the destination Rebecca Babin at CIBC, thank you very much
 for that. We'll see you soon. Thank you. All right, we got a market alert now and fresh
 labor data from Challenger Gray and Christmas showing job cuts were up 38% in April from March
 employers announcing more than 83,000 job cuts last month year to date job cuts are actually
 down though by 50%. A lot more to come here on morning call including getting the latest
 taste of consumers appetite for restaurants amid growing pricing pressures, what to watch for
 from McDonald's results and the key market is looking for its next growth opportunity. And as we
 had it to break, check out one of brother's discovery shares posting better than expected revenue
 growth as HBO maxed his expansion overseas boosted subscriber growth and engagement advertising
 following 7% due to NBA content losses and linear TV declines. Warner Brothers Discovery shares
 down half of 1%'s pre-market morning call is back after this.
 All right, welcome back to morning call McDonald's results are out in just about an hour's time.
 Top of mind for investors, any signs at higher gasoline prices are having an effect on sales.
 One area of opportunity for the fast food giant though is in China while other foreign brands are
 trying to exit McDonald's is bucking the trend. Our Eunice Yoon has more on that China story.
 This McDonald's opened up across the street from my house in March.
 This one opens last October. This one in October too. So there are seven McDonald's within
 walking distance of my home. Only the US has more stores than China and the market is a big
 source of the company's growth. Half of its new stores last year were here. The country's first
 McDonald's opened in 1990 and the iconic golden arches captured the excitement of China's opening
 to the world and rising wealth. The brand still benefits from that nostalgia. McDonald's brought
 back the classic shake, which was discontinued here more than a decade ago. It's now viral.
 I remember having this shake the first time as a kid, he says. We drove half an hour here to get
 it. McDonald's left a great first impression for those eating western fast food for the first time,
 he says. Nowadays we have so many options in fast food, western or Chinese. But for me,
 70% of the time I go to McDonald's. And now McDonald's is riding the new spirit of the times,
 affordability in a down economy. A lot of Chinese see McDonald's as good quality on a budget. McDonald's
 has its own version of what the Chinese call the poor man's meal. For two dollars you could get a
 burger and a drink or dessert. And the menu is a mix of classic standbys, like the Big Mac,
 and frequently refreshed local editions, like honey barbecue chicken bones or dragon fruit
 McFlurries. Items that appeal to Chinese consumers always looking for the new thing, even when it's old.
 And as at the end of last year, McDonald's had about 7,700 new stores or stores in the country
 and the goal, though, is to have 10,000 stores by 2028.
 All right, Unis, June, live in Beijing with the McDonald's story in China. Thank you very
 much for that. Let's talk more about that McDonald's story and the broader restaurant sector overall.
 Brian Harbor recovers the space over at Morgan Stanley. Brian, an interesting point there
 from Unis about these growth markets for certain fast food operators. McDonald's tapping China
 is it a winning strategy in your mind? Yeah, thanks. The reality is China's huge growth
 market for a lot of the companies like Harvard, right? They're building new stores in a torrid
 base, right? I think that's going to continue. Everyone's sort of determined to gain share in
 that market. At some point maybe it gets quite crowded, but if certainly if you talk to McDonald's
 Starbucks, even now Burger King, really targeting a lot of new stores there.
 All right, Brian, when terms of the McDonald's story, if you take a look at the McDonald's
 story, what exactly is going to be the key thing to watch today? And how does McDonald's rank
 in your coverage universe? Is it the best option for investors right now?
 Yeah, look, I think US and Europe are really more of the focus for McDonald's.
 Certainly more of a profit driver. We are expecting a little bit of a best there,
 you know, when you think about same-sword sales in those markets. I do think there's probably
 some response to gas prices here that's happened. Look, we're equal weight rated McDonald's.
 I think that there's still some headwinds there. We've also written a lot about things like
 GLP once and health and wellness. And I don't think those are going away. So it's not necessarily
 the top of the pack when I think about my restaurant coverage.
 And so that begs the question, what's the top of the pack?
 Well, you just said Dutch Brothers reported a very good quarter last night. That's something we
 really like. We've been overweight there for a while. They put up kind of 8% seems for
 sales. The beverage segment does seem to be doing very well right now and bucking some of those
 friends. So that's the stock we like a lot. All right, Brian Harbor with the story of McDonald's
 and Dutch Brothers as well. We appreciate it. We'll see you soon, sir.
 Thank you. All right, straight ahead on the show. The morning call crew team up the
 trading day ahead, including another busy day of earnings and fresh reads on the labor
 landscape ahead of a key report all that coming up after this.
 Welcome back. It's time for your call sheet where we look at the topics driving the trading day ahead.
 The crew members we have today this morning, Steve Grasso, CEO of Grasso Global. He's also a
 CMBC contributor. Barbara Durand, Chief Investment Officer at BD8 Capital Partners and Ed Mills,
 Washington Policy Analyst at Raymond James. Thank you all for being here with us this morning.
 Let's start off with our first topic and markets overall vis-a-vis what's happening with the
 Iran War? And perhaps I will start with Barbara, you first, just how much of the markets have been
 a surprise to you, given everything we're seeing and still hitting record highs even for the small
 caps? Well, I think what's been a surprise, Dom, is the earnings growth. I mean, we just, just
 at the beginning of this quarter, earnings estimates were about 13-14%. They are now coming in at
 27%, which is more than double what was expected. So that is a big surprise. We're seeing profit margins
 at record level with, got forward guidance being even higher and revenues are also higher than
 expected, some by one or two percentage points. So that is a surprise, not because we didn't,
 the Iran War started later. So it was not going to have a lot of impact on the first quarter
 earnings, but even the forward guidance. I mean, people, companies, investors are really looking
 through the Iranian War, expecting it to be short-term because we know about negotiations
 and determination to get the straight open. So that is a big surprise. And the question,
 of course, is what happens the rest of the year? And where are the risks in terms of global
 demand slowing if this Iran War continues to be protracted? You know, Steve, Barbara rings up
 an interesting point. This past quarter's results don't really reflect what's happening with Iran,
 but the outlook that these guys are given right now does. So the market reaction is already factoring
 in some of that past performance and expectations for future performance is the record high justified.
 Yeah, well, you know, Tom, we really switched from a fear of what could happen and everyone
 always prices in the worst-case scenario to a fear of missing out. So you've had people dump the
 market, short it, then chase it to the upside. But you know, to the point of earnings, this is
 really a shocker. And it really shouldn't be when you look at the big beautiful bill, right?
 This was stacked for corporations. Corporations should have better guidance going forward.
 The caveat is the war. If the war lingers on longer, and this is really, I know we're in the
 microwave society. We expect every immediate and immediate results. But as long as we could wrap
 this up, you know, I think the markets probably look higher from here. All right, let's move on to
 some of the economic data and Ed, I'm going to turn to you for this one. We got some data this morning
 from Challenger Gray and Christmas about the state of kind of layoffs, kind of the bigger picture
 job cuts and gains. Overall though, we're still at a better level on a year-over-year basis.
 How exactly is the labor data shaping up macro wise and doesn't have a real influence on what's
 going to happen with the Fed outside of what we're seeing with Iran? Yeah, so when we look at the Fed,
 we know that Kevin Worsh is going to be confirmed here. We know that we're going to have a big divide
 within the board of governors and within the FOMC. And what they are going to be looking for,
 they want to see the labor market holding up. They want to see some cooling of inflation
 before Worsh is going to be able to do what President Trump wants, which is to cut more rates.
 The final piece of that is what's happening with the Iran War. I do think the President wants to
 wrap this up. I do think that there is a desire on the Iranians side to wrap this up to the extent
 that they can look through that. To the extent there can be sanctions relief and maybe some downward
 pressure on oil prices where all we've had is upward pressure. Those would be the things that
 the Fed's looking for and that's when they would actually cut. The status quo right now, Steve,
 is that the labor market has been for quite some time stable, not gangbusters by certainly no means
 recessionary. It's just been plugging along at a very decent but modest pace. Is that enough
 to support the market narrative right now? Yeah, and not only that, I think that when you look at
 the masses thinking about a rate hike, central banks who have hiked into a supply disruption
 with oil have always reversed course. Think about how you hit the consumer. They're ready hit
 at gas prices. They're ready to hit the pump and then you hit them for borrowing costs. So there's
 really a bifurcation. The people who need the credit, the lower income bracket, who need credit
 and don't have things, they're the ones that are hurt the most. The ones with assets already have
 them and they already have them at low interest rates. So if you want to sit on your hands with
 interest rates fine, the raising interest rates down should not enter the conversation right now.
 All right. So Barbara, if we're not raising interest rates eminently, nor cutting them
 eminently, what exactly will we need to see from the labor market to catalyze some kind of direction
 one way or the other? Well, in the labor market, we saw the jolt's number this week. So the ADP,
 we've got jobless claims coming out this morning, which have been very steady and not showing any
 signs of stress and of course the payroll numbers on Friday. So I think if we continue to see the
 labor market holding up, not a lot of hiring, not a lot of firing, you know, I think the Fed can
 rest assured that the rates do not need to come down because they have to keep an eye on inflation.
 And you saw the PCE and the CPI headline number are both over 3% that seems to be short term
 because of higher oil prices. But again, if that gets a little more embedded, I think the Fed,
 you will be looking towards the end of the year toward raising rates. But I think the expectation
 is that with productivity increases, hopefully this streak gets open soon, inflation, you know,
 probably is at its short term peak. All right. Ed, the next topic we have is what's going to
 happen with earnings season. This back half of the season has always tilted heavily towards the
 consumer. We've already heard commentary from Good Year Tire and Whirlpool about some of the
 stresses we are seeing. How important is it, especially in the midterm election year?
 Yeah, Dom, if you asked me what I was going to be talking about at the beginning of the year,
 it was all about affordability coming out of Washington, DC. Instead, we're talking about kind of
 gas prices getting to high numbers over the last several years. When you look at some of these
 consumer items, what I'm getting a lot of questions at Raymond James is what's going to happen with
 tariff relief? Not much in what we've actually seen for companies like a Whirlpool is new steel and
 aluminum tariffs going on some of their products. And so we're going to see a lot of pressure on
 the president not to increase tariffs from here, but he doesn't necessarily think tariffs get passed
 onto the consumer. So those are still biased higher, especially as we get to the end of these
 temporary section 122 tariffs. And he's going to implement a lot of 301 tariffs. So there's some
 volatility ahead in the market. As we do this, the offset to that is exactly what Steve mentioned,
 the reconciliation bill, that one big beautiful bill had an enormous amount of stimulus. Record
 kind of refunds for consumers this year. That stimulus is double this year because it was retroactive
 to last year. So they got the refunds this year, but are adjusting payrolls this year. So it's a
 balance. All right. Ed Mills, Barbara Durand, Steve Grassau. Thank you very much for our morning
 call crew. We appreciate it very much. All right. Keep it right here. Future is right now. She's
 going to use some modest gains. The Dow's imply however, just about 20 points. Keep it right here.
 Squawk box starts right now.