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Stocks are declining even as companies deliver strong earnings, with a 30% surge in jet fuel costs and tightening financial conditions weighing on the outlook. "The earnings story is compelling, but markets are pricing in what comes next — higher costs, tighter liquidity, and the risk that demand softens," said Sarah Lin, equity strategist at Edgen. Jet fuel spot prices surged nearly 30% between July 2 and July 22 to $3.59 a gallon, according to Reuters data, adding $1.6 billion to American Airlines' projected fuel bill for the rest of the year. The carrier cut its full-year earnings forecast to around breakeven from an expected $1.5 billion in pretax profit. Delta Air Lines maintained its outlook while United Airlines raised the lower end of its forecast, though both cited fuel as a growing concern. The divergence between earnings and stock prices suggests investors are looking past current results to future headwinds. If the trend continues, it could signal a broader market correction, with sectors most exposed to input cost inflation facing the steepest pressure. Traders pointed to three overlapping catalysts behind the selloff: a rapid rise in commodity costs tied to geopolitical tensions, expectations that central banks will keep rates higher for longer, and growing evidence that corporate margins are peaking as input costs outpace pricing power. For airlines, the math is unforgiving. Every one-cent increase in American's average fuel price adds about $46 million to its annual expense, Chief Financial Officer Devon May said in an interview. A 10-cent increase would cost roughly $460 million, flowing almost entirely through to pretax earnings. American's projected fuel bill rose by about $550 million in the past week alone, May said. The fuel shock is rippling across the industry. Alaska Air Group declined to restore full-year guidance, while Southwest Airlines lowered the floor of its outlook. United said the rise in fuel prices since July 1 added $575 million to its expected third-quarter fuel bill and changed its guidance policy to use the latest available prices. The broader concern is that fuel is just one example of a wider cost squeeze. If other input costs follow the same trajectory, the earnings beat that investors are celebrating today could reverse in the quarters ahead. This article is for informational purposes only and does not constitute investment advice.
**American Airlines must close a more than $3 billion profit gap with United and Delta, and CEO Robert Isom has a plan.** Isom outlined a strategy to close a $3 billion profit gap with United and Delta by investing in premium cabins, lounges and new wide-body planes. "The long-range plan is certainly making up the margin gap," Isom said in an interview with CNBC, without putting a timeline on the goal. The carrier's 140,000 employees want "to be best at everything that we do," he said. American flies about 6,500 flights per day — more than any US competitor — yet United brought in roughly $3 billion more in profit last year and Delta made nearly $5 billion more. The carrier is forecast to earn 64 cents a share on an adjusted basis in 2026, up almost 80% from a year earlier, according to analyst estimates. Wall Street expects adjusted earnings to quadruple to $2.58 a share by 2027. The airline's plan rests on growing its loyalty program, improving customer experience and expanding its network. American is remodeling cabins across its fleet, taking deliveries of new planes with more premium seats, and preparing a wide-body aircraft order from either Boeing or Airbus that Isom said could come this year. The carrier's more than 1,000 planes make up the youngest fleet among the three largest US airlines, though dozens of its Boeing 777 wide-bodies average more than two decades old. **Lounges, Cabins and the Premium Bet** American plans to build its largest Admirals Club lounge — 37,000 square feet — at Dallas Fort Worth International Airport's Terminal C, Chief Customer Officer Heather Garboden told CNBC. The airport, American's largest hub, is undergoing a $12 billion makeover. The carrier is also refreshing cabins on its Boeing 787-8 Dreamliners, with revamped interiors on its 777-300ERs expected to debut in coming weeks. Each business-class lie-flat seat can generate close to $10,000 on some long-haul international routes, compared with $2,000 or less for a seat in economy. United has had roughly a decade head start at catering to higher-paying travelers, while Delta has close to two decades of experience. American is trying to replicate their success through technical changes that offer customers more opportunities to buy pricier seats. **Debt, Reliability and the Path Forward** American's earnings remain constrained by a $35 billion debt load, though the carrier has cut that from a peak of about $54 billion coming out of the pandemic. The airline ranked sixth of 11 US carriers in punctuality in the first half of the year, with a 76.6% on-time rate, according to Cirium data. Delta and United took the second and third spots. Chief Operating Officer David Seymour is working to improve reliability by spreading out schedules and using artificial intelligence to predict maintenance problems. The carrier's board recently added John W. Dietrich, a former FedEx chief financial officer and Atlas Air Worldwide chief executive, to its Audit and Finance committees. His appointment comes as American marks its centenary in 2026. The strategy shows management's confidence that American can close the revenue gap with its larger rivals. Investors will watch the carrier's second-quarter results on Thursday for updated forecasts on margins and the timeline for the wide-body order. *This article is for informational purposes only and does not constitute investment advice.*
American Airlines Group Inc. fell 5% Wednesday, leading a broad airline selloff as crude oil jumped after President Donald Trump declared the US-Iran ceasefire over. "As far as I'm concerned, it's over," Trump said at the NATO summit, casting doubt on further negotiations even as diplomatic efforts continued behind the scenes. United Airlines Holdings Inc. dropped 4%, while Delta Air Lines Inc. and JetBlue Airways Corp. each slipped 3%. Brent crude for September delivery surged 8% to $80.12 a barrel, and West Texas Intermediate for August delivery rose 7.7% to $75.83. The Dow Jones Industrial Average fell nearly 1% as the broader market also declined. The jump in crude directly pressures airline margins, as jet fuel is among the largest operating expenses for carriers. If oil prices sustain at these levels, airlines may face downward pressure on earnings estimates, potentially forcing capacity cuts or fare increases in the coming quarters. The selloff in airline stocks outpaced the broader market's decline, reflecting the sector's acute sensitivity to fuel costs. The geopolitical catalyst added a layer of uncertainty that extended beyond energy markets. An International Monetary Fund official said global inflation expectations remain broadly well-anchored, though some signs of upward drift are emerging in certain regions — a dynamic that could complicate central bank policy if sustained oil gains feed through to consumer prices. For the airline sector, the timing of the oil spike is particularly challenging. Carriers had been benefiting from moderating fuel costs earlier in the year, and a sustained reversal could force revisions to second-half guidance. Investors will watch for any hedging updates or capacity adjustments from the major carriers in the coming days. This article is for informational purposes only and does not constitute investment advice.
**Falling jet fuel prices and sustained travel demand have lifted U.S. airline stocks more than 20% in June, with United Airlines and Delta Air Lines approaching record highs.** U.S. airline stocks surged more than 20% in June, pushing United Airlines and Delta Air Lines toward record highs as jet-fuel prices tumbled and travel demand remained strong. "Air-travel demand was strong before the Iran war and has remained strong throughout," said David Russell, global head of market strategy at TradeStation. "The fighting drove up air fares but ended in time for fuel costs to fall." Jet-fuel prices have fallen to about $2.90 a gallon from nearly $5 in early April, when the U.S. and Israel's conflict with Iran effectively closed the Strait of Hormuz. Crude-oil futures slid about 20% in June, with West Texas Intermediate crude trading at $69.83 a barrel. Jet fuel accounts for 25% to 30% of airline operating costs, making it the industry's second-largest expense after labor. The combination of lower input costs and constrained capacity — Spirit Airlines collapsed and Boeing and Airbus face persistent delivery backlogs — has set the stage for what could be a record summer earnings season. Delta Air Lines kicks off reporting July 10, with American Airlines and United Airlines following the next week. United Airlines shares hit a record $130.60 on Wednesday, extending gains after the carrier introduced its first transatlantic flight equipped with SpaceX's Starlink connectivity and unveiled a live-television content partnership. UBS raised its price target on United to $153 while maintaining a buy rating ahead of the company's second-quarter earnings report. The U.S. Global Jets ETF, a proxy for the sector, reached a record $34.66 on Friday and is on track to end June with a 13% gain. The broader market has also supported the rally, with the S&P 500 rising 0.8% to 7,500.10 and the Dow Jones Industrial Average closing at a record 52,348.49. BofA Securities analysts said in a recent note that domestic capacity growth is "flattish" through September and real-time demand indicators remain firm. Average ticket prices rose more than 18% year over year in May, with economy fares climbing more than 20% for the third consecutive month, outpacing premium fares. Aggregated credit- and debit-card data showed airline spending returning to double-digit growth, supported by strength in spend per transaction. The Cboe Volatility Index fell 5.7% to 16.65, reflecting easing concern about broader market turbulence. The U.S. 10-year Treasury yield stood at 4.42%, while gold traded at $4,044 an ounce. This article is for informational purposes only and does not constitute investment advice.
BHP Group shares fell more than 10 percent from a record close on June 17 as jitters over AI spending and a rising dollar hit the world's biggest miner by market value. "This shift changes the nature of BHP's earnings base from something tied closely to Chinese property and infrastructure cycles to a long-duration demand story around electrification, AI and grid buildout," Justin Lin, an investment strategist at Global X ETFs, said. Copper now accounts for more than half of BHP's underlying earnings for the first time, as the company and rivals including Rio Tinto have made the metal the centerpiece of their growth plans. The US dollar climbed to its highest in more than a year against a basket of currencies after Federal Reserve Chair Kevin Warsh struck a hawkish tone at his first rate-setting meeting, fueling expectations of interest rate increases within months. The stronger greenback has spooked investors who bet on mining as part of the so-called debasement trade, Morgan Stanley said in a note. "Feedback from clients remains that the hawkish surprise from Fed was not on the markets' bingo card and until it stabilizes, miners could remain in the penalty box," the bank said. BHP shares steadied Friday in Sydney but ended the week more than 10 percent below the record close set on June 17. Rio Tinto also retreated from recent highs, while in London, Glencore and Anglo American remain sharply higher year to date despite the pullback. The selloff reflects how mining stocks have become increasingly tied to the performance of AI hyperscalers spending hundreds of billions of dollars annually on data centers that require large amounts of copper. Tech stocks fell sharply last week on mounting fears about the massive borrowing and spending required for the data-center buildout, dragging miners lower alongside them. **Dollar Strength Pressures Commodities** An appreciating greenback is widely viewed as a headwind for dollar-denominated commodities, making them more expensive for buyers using other currencies. The Australian dollar dipped to US68.94¢, extending its monthly losses to about 4 percent. Copper prices declined on the London Metal Exchange as the Fed's hawkish stance and a strong dollar weighed on metals markets. Brent crude steadied at $71.90 a barrel after an early bounce in Asian trade faded, while gold slipped to near seven-month lows as the dollar strengthened. **Analysts See Buying Opportunity** Despite the pullback, the fundamental thesis for mining stocks remains intact. "If you look at the way these stocks have performed, every dip is bought," said Darko Kuzmanovic, a senior portfolio manager on the global natural resources team at Janus Henderson Investors. In addition to AI-driven copper demand, electrification, decarbonization and deglobalization are all positive tailwinds for the mining sector, according to Kuzmanovic. BHP shares had repeatedly set new all-time highs this year before the recent pullback, and Rio Tinto's Sydney-listed shares followed a similar trajectory. The S&P/ASX 200 closed 0.7 percent higher Monday at 8,823.40, with the tech sector rebounding nearly 4 percent as investors returned to risk assets. But the mining-heavy materials sector faces continued uncertainty as markets weigh the path of US interest rates and the sustainability of AI-related spending. This article is for informational purposes only and does not constitute investment advice.
WTI crude has tumbled more than 20% over the past month to around $75 a barrel after the U.S. and Iran signed a memorandum of understanding reopening the Strait of Hormuz, a chokepoint handling about 21% of global oil trade. "The speed of the oil price decline has been remarkable, but the normalization process is far from linear," said Elena Fischer, geopolitical risk analyst at Edgen. "The MOU kicks off a 60-day negotiation window, and any breakdown in talks could quickly reverse the supply glut." WTI had surged to nearly $113 a barrel in April after the conflict disrupted tanker traffic through the waterway. Prices had already fallen from those highs before the deal, as strategic inventory releases, a collapse in demand from top buyer China, and tankers sneaking "dark" out of the Persian Gulf contributed to a small oversupply in key markets, traders told Bloomberg. The U.S. Global Jets ETF now trades above its pre-conflict level, and Delta Air Lines shares hit an all-time high last week. The 60-day negotiation period means the reopening remains fragile. Trump has already called any Iranian toll charges on Hormuz passage "unacceptable," and talks are set to resume next week. For airlines, lower jet fuel costs could improve margins in the coming quarters, but the sector's high fixed costs and cyclical nature mean investors should focus on individual carriers' fundamentals rather than the geopolitical tailwind. **Delta vs. American: Two Divergent Paths** Delta Air Lines has proven the most resilient U.S. carrier during the conflict. Its stock is up more than 21% year to date and reached an all-time high last week after announcing a 15% quarterly dividend increase. The airline owns an oil refinery in Pennsylvania, which helped offset the worst of the higher jet fuel costs during the crisis. Delta generated more than 60% of its first-quarter revenue from premium and corporate customers, a segment that continued traveling even as prices rose. Q1 2026 revenue reached $14.2 billion, up almost 10% year over year, though the carrier posted a net loss of $289 million for the quarter. American Airlines presents a different picture. The carrier is pursuing a turnaround strategy focused on increasing its corporate and premium share while improving flight reliability. Its Q1 2026 revenue rose almost 11% year over year to $13.9 billion, but its net loss was higher at $382 million. American's heavy debt burden — $34.7 billion at the end of Q1, the first time under $35 billion since 2015 — limits its flexibility compared with Delta's $13.5 billion in total debt. American has underperformed industry peers this year, which could present an opportunity if its strategic changes gain traction. **What Comes Next** The last time a major Middle Eastern chokepoint faced disruption — the 2019 attacks on Saudi Aramco's Abqaiq facility — oil prices spiked 15% in a single day but reversed those gains within two weeks as supply normalized. The current situation carries more complexity: damage to key infrastructure could take months or years to repair, and the 60-day negotiation period leaves the door open for renewed restrictions if violence restarts. For now, the market is pricing in continued normalization, but the risk of a reversal remains embedded in options pricing. This article is for informational purposes only and does not constitute investment advice.