AI Shockwaves, Oil Spike, and a Risk-Off Pre-Market

Grant Calloway

The... the thing you have to understand about a truly global tape is that when a butterfly flaps its wings in Beijing, the floor in New York doesn't just feel a breeze, it-it gets hit by a category five hurricane. And uh, this morning, that butterfly is a Chinese AI company called Moonshot. They just dropped what they are calling "Kimi K3"—and according to Moonshot, it is the world’s largest open-source AI model. Now, if you are sitting on the boards of the US tech giants, this is a direct, front-on assault on your subscription revenue models. Why pay a premium for a closed garden when the world's largest model is suddenly open-source? The global markets are absolutely reeling from this. Overnight, South Korea's KOSPI and Taiwan's Stock Exchange both plummeted over 6%. And as I watch the pre-market action right now, Nasdaq-100 futures are sliding 2.05%—that is down 599.75 points—while the S&P 500 futures have dropped 1.10%, shedding 83.25 points. It is a massive risk-off wave, and it is hitting before the opening bell even rings.

Grant Calloway

But uh, look, it's not just the tech sector getting whipped around. The macro picture this morning is, frankly, tighter than a drum, and not in a good way. We had overnight US military strikes in Iran, and that has sent oil futures screaming higher. Brent Crude is back above $85 a barrel—up 3.15% to $86.88—while WTI Crude jumped 3.37% to $81.61. This is a massive headache for the Fed. Just as we thought June's CPI was showing some cooling down to 3.5%, boom, energy prices flare up again. In fact, AAA is reporting the national average for regular retail gasoline has crept back up to $3.98 a gallon. Talk about a wet blanket on the inflation-cooling narrative. Let's look at how the individual names are moving in the pre-market, because we have a massive dispersion of winners and losers this morning. On the losing side, Netflix—ticker NFLX—is plunging 9.4% in early trading, and in late pre-market, it's actually slid further, down 11.59% to $65.73. That is on the back of a Q2 revenue miss—they reported Q2 revenue of $12.56 billion, below analyst estimates of $12.58 billion—and a pretty soft Q3 outlook. And of course, the semiconductor names are taking a beating from the Moonshot news. NVIDIA is down 2.5% to $202.12, and Micron is dropping over 3% to $825.10. But it's not all red on my screen. The insurance space is a major bright spot. Travelers Companies—TRV—is surging after a massive Q2 print. They reported quarterly adjusted earnings of $10.04 a share, up from $6.51 a year ago. Wall Street was only expecting $5.41. That is a colossal beat. We also have some decent banking numbers. Fifth Third Bancorp—FITB—reported Q2 net income of $763 million. They had a reported EPS of $0.83, but their adjusted EPS of $1.02 excludes $0.19 of certain items, which is a solid beat. Plus, their credit quality looks incredibly clean with net charge-offs falling to 30 basis points. Regions Financial, ticker RF, also beat expectations, reporting second quarter 2026 earnings of $549 million and diluted EPS of $0.64, with adjusted EPS coming in at $0.68. This morning's pre-market rundown is brought to you by Jellypod. When the tape is moving fast and you need your financial news automated, customized, and spoken straight to you, visit jellypod.com.

Grant Calloway

Now, let's talk about Netflix for a second, because there is a fascinating corporate battleground developing here around disclosures. Netflix announced they are shifting how they report their engagement data. Specifically, they are moving their "What We Watched" biannual view-hour metrics to an annual cycle starting in 2027. Look, as an old floor guy, my immediate reaction to this is... well, it makes me highly skeptical. Whenever a company starts hiding its metrics or lengthening the reporting interval, it's usually because they see a growth cliff coming. With the threat of TikTok eating up consumer attention and the looming Paramount-Skydance merger consolidation, this move to hide the engagement numbers tells me that maybe, just maybe, the structural engagement is starting to rot from the inside out. They want to hide the decay. But, you know, let's be fair and look at the other side of the ledger. The bull case here is that Netflix is simply growing up. They are a mature utility now, not a high-flying, hyper-growth startup. They want Wall Street to stop obsessing over raw, volatile vanity metrics like hours viewed, and focus instead on institutional execution—monetization, average revenue per member, and the growth of their high-margin advertising tiers. It is a logical transition for a market leader, even if it makes old-school traders like me twitchy about transparency.

Grant Calloway

Looking ahead to the rest of the morning, we have a very busy macro slate before the 9:30 AM ET opening bell. At 8:30 AM, we get the Department of Commerce data on Housing Starts and Building Permits—the Street is looking for 1.320 million starts and 1.400 million permits. Then at 9:15, Industrial Production drops. Manufacturing output is expected to rise 0.2% month-over-month, with capacity utilization projected at 76.2%. Shortly after the open, at 10:00 AM, the Consumer Sentiment Index is forecast to tick up to 51.3. For corporate conference calls, both Travelers and Fifth Third host theirs at 9:00 AM ET, and Regions Financial follows at 10:00 AM. On a high-volume, risk-off morning like this, the golden rule of the floor always applies: never try to catch a falling knife. Let the market find its footing before you put your capital to work. Alright, that is the pre-market view. This podcast is for educational purposes only and is not investment advice.