Overnight, the ceasefire cracked. Iran fired on three US Navy destroyers in the Strait. The US struck back. Both sides say the other shot first. Futures are modestly green ahead of the jobs print. But the week's rally was built on a deal being close. Thursday night's fire puts that bet at risk.

The dollar is softer. Gold is climbing. The VIX barely moved despite Thursday's fade. The market pulled back without getting nervous. That's either strength or denial. The jobs number at 8:30 decides which.

Datadog (DDOG) jumped nearly a third after the bell. The AI software trade just proved it can match hardware-level growth. The peace trade or the earnings trade is doing the work. Today tells you which one.

Market Implication

The Hormuz exchange of fire makes the weekend a pricing event. If oil gaps higher Monday, homebuilders, utilities, and REITs give back the week's gains first. Those are the names that rode the oil drop hardest. If oil holds near Thursday's settle, earnings carry the weight into next week and those same names extend.

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The first is deal hope. The US sent Iran a one-page memo through Pakistani go-betweens. Iran said it was weighing it. Oil dropped from its Monday highs to the mid-nineties by Thursday's close. That single move in crude gave equity indexes room to run. Small caps, industrials, and rate-plays all rode it higher.

Then a senior Iranian official pushed back. Reparations were demanded. Hours later, the Strait lit up again.

The second force is AI earnings. The software layer of the AI stack is printing growth that matches the chip names. Datadog's revenue sped up for the third straight quarter. Akamai (AKAM) landed a huge cloud deal from a top AI model builder. Fortinet (FTNT) surged on a security beat that caught the street off guard. This isn't the side trade anymore. It's its own story.

Structural Setup

The AI software layer broadens the trade. But the oil drop that made room for the rally is at risk. If Hormuz heats up and crude reverses its weekly slide, the rate-plays give it back first. Small caps and industrials led the week. They'd lead the unwind too.

Materials fell the most. Energy and industrials followed. Tech and comm services held green, barely.

The after-hours tape told a clearer story. Datadog gapped higher on its beat and guide-up. Akamai followed. On the other side, Planet Fitness (PLNT) crashed after slashing its outlook and scrapping a price hike. Expedia (EXPE) dropped on soft guidance. CoreWeave (CRWV) slid on weak forward numbers. Airbnb (ABNB) beat on revenue and raised its guide but flagged war-driven cancellations across Europe and Asia. 

The guide raise and the cancellation flag offset each other exactly. The market couldn't find a direction because the forward picture has two equally weighted outcomes. That's not a neutral print. It's a frozen one.

The pattern is clean. Beating isn't enough. You need the guide-up. The market is selling everything that looks like it's peaking.

Sector Read

The AI trade is moving from chips to monitoring and security. That's the signal in the Datadog and Fortinet prints. Watch whether it carries into Monday or gets buried by oil.

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ADP surprised higher this week, but the two measures have been diverging for months.

This is the first big labor read before Kevin Warsh's first meeting as Fed chair in June. Rates sit near three and a half percent. Energy-led inflation keeps cuts off the table. A soft print won't change that fast. But it plants a seed.

The Hormuz path just got harder. Saudi Arabia let Project Freedom resume hours before the fire broke out. Iran has set up a new agency to charge tolls on all ships through the Strait. That is a structural shift. The Strait is no longer closed. It is being monetized. A closed strait can be reopened by a deal. A monetized strait is a permanent revenue source Iran has every incentive to maintain. Those are two different problems for the global shipping market.

Watch Signal

Watch Brent at Sunday's open. Below $95 means the market is absorbing the fire as an isolated incident and the deal trade survives. Above $105 means the ceasefire is being repriced as broken and credit spreads follow within the session. That ten-dollar range is the entire weekend risk premium in one number.

Growth has been speeding up. Each of the last three quarters came in faster than the one before. That's the opposite of what Wall Street expects at this scale.

The reason matters. The big cloud providers used to build their own monitoring tools. Now they're handing GPU tracking to Datadog. AI training setups are complex enough that even the giants want a specialist.

Large customer count grew fast. Cash flow margins held near the top of their range. Management raised the full-year guide well past the street.

The Read

Datadog's quarter shows the AI capex cycle reaching the software layer. Monitoring isn't a side bet on chip spending anymore. It's its own growth story. The names that can show faster revenue at scale will pull away from the ones that can't. That filter just got sharper.

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Economic Data: Non Farm Payrolls, Unemployment Rate, Average Hourly Earnings, Participation Rate, Michigan Consumer Sentiment

Fed Speakers: Cook, Goolsbee, Bowman, Waller, Daly 

Earnings: Ubiquiti (UBNT)

Overnight: Nikkei -0.19%, Shanghai Composite 0.00%, FTSE -0.23%, DAX -0.83%

Two signals drop this morning. The jobs number tells you if the labor market can take the energy shock. The Hormuz fire tells you if the deal trade holds.

The market is at record highs heading into both. It got here on Iran deal hope and strong AI prints. Those two pillars held all week. Thursday night cracked one. Friday morning tests the other.

If payrolls come in stable, the path is clear. Earnings carry the load. The Fed stays put. If the number cracks, the talk shifts to growth risk. The Fed can't cut because energy won't let it. That's a different tape.

Hormuz decides the weekend. A ceasefire that holds by a thread is not a ceasefire. It's a gap waiting to open Monday morning.