So Close, and Yet… The Dow Jones Industrial Average once again tried its best to close above 50,000 today, but geopolitics got in the way.

Stocks opened a touch higher Thursday, but retreated toward the end of the session after The Wall Street Journal reported the U.S. was resuming an operation to escort vessels through the Strait of Hormuz. President Donald Trump had put the initiative, called Project Freedom, on pause Tuesday, saying there was “great progress” in negotiations with Iran. Talks between both countries are ongoing, but there is still no peace deal in place.

The Dow ended down 314 points, or 0.6%. The S&P 500 fell 0.4%, and the Nasdaq Composite was off 0.1%.

Oil prices likely had something to do with the market’s softer performance. Brent crude futures for July delivery ticked back up to a little over $100 a barrel, despite trading at an intraday low of $96.03 a barrel.

As I wrote in this week’s edition of Barron’s Global Signals (my new newsletter focused on geopolitics—you can sign up for a four-week free trial here), markets have generally looked past oil shocks this year, notching big wins thanks to AI optimism and strong earnings. Indeed, part of the reason the Dow has lagged behind the S&P and Nasdaq in recent weeks is because it has much less exposure to chip stocks, which have benefited from signs that tech companies are still splurging on AI infrastructure.

Once the earnings onslaught fades, though, there will be little else to distract investors from the long-term damage the conflict has wreaked on the global oil market. Prices are likely to stay elevated well into the end of the year, even if a peace deal is reached, driving up inflation and dampening economic growth.

Bulls say the market has already priced in oil market shifts, and are focusing instead on U.S. economic tailwinds like strong earnings growth, fiscal stimulus, and meaningful deregulation. We’re “solidly in a risk-on market regime,” said Darius Dale, CEO of 42 Macro, a risk management research firm.

But even (especially?) in an risk-on environment, it pays to be selective and focus on holding or buying quality stocks. Markets are still sensitive to the back-and-forth in the Middle East, so expect more choppy trading days ahead.

The Hot Stock: Datadog +31.3%
The Biggest Loser: Zoetis -21.5%

Best Sector: Communication Services +0.1%
Worst Sector: Materials -1.8%

Something funky happened with fitness stocks today. Peloton Interactive jumped 8.9%, while Planet Fitness dropped 31%. It’s almost as if we’re back in 2020, when a pandemic made millions of people stay home from the gym and stock up on at-home fitness equipment.

We’re not, of course. The diverging performance between Peloton and Planet Fitness is more about earnings than the prospect of another mass viral outbreak.

Ironically, Planet Fitness had a better quarter than Peloton did. Planet Fitness beat on both the top and bottom line, while Peloton’s earnings slightly missed expectations. It comes down to the outlook: Planet Fitness lowered its annual forecasts for both earnings and revenue, saying that sign-ups disappointed. The company also said it was pausing price increases, originally slated for this summer.

Peloton, meanwhile, was able to strike a more optimistic tone about the pace of its turnaround. The company improved its free cash flow, reduced debt, and lifted the lower end of its annual revenue guidance.

“We continue to make great progress on deepening our relationships with our members, growing our opportunities to reach new members globally, diversifying our revenue streams and planting new seeds for future growth, all while continuing to strengthen our financial foundation,” CEO Peter Stern said on a call with investors Thursday.

Peloton needs the dash of enthusiasm. The stock surged during the height of the Covid lockdowns, but when the world opened back up, “Peloton was left behind,” writes my colleague Angela Palumbo. Shares have fallen 97% from a January 2021 peak. Since then, the company has done a lot to spur investor sentiment, including switching up CEOs (twice!), price increases, and overhauling its product line.

As Angela writes: “Peloton stock’s jump on Thursday shows that investors are excited about the steps the company has taken, and what’s ahead. It’s up to management to keep the momentum going.”

Brookfield Asset Management, Wendy’s, Enbridge, PPL, and Fidelity National Information Services report quarterly results.

The BLS will release the nonfarm payrolls report for April. The consensus among economists polled by FactSet predicts the U.S. economy added 55,000 nonfarm jobs in April, down from 178,000 in March. Economists expect the unemployment rate held steady at 4.3%.

The University of Michigan releases its preliminary consumer sentiment index for May.

—Connor Smith

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