Why have U.S. stocks surged again to record highs?

After the easing of U.S.-Iran tensions, U.S. equities swiftly reverted to the fundamental-driven narrative of the earnings season. Once back on fundamentals, it’s all about the data—never mind whether cloud giants or AI model firms are actually profitable, or whether software vendors have truly been displaced; the key question is: are the ‘shovel sellers’ (i.e., semiconductor and infrastructure suppliers) making money? As for whether the AI narrative holds water—well, who cares? Chipmakers already have orders booked through 2027, and their earnings reports are blinding. But will U.S. stocks hit new highs based purely on fundamentals? Not necessarily. 1. Medium- to long-term risks: Does the AI story truly hold up? So far, upstream AI hardware makers (semiconductors) and midstream cloud giants (Microsoft, Google, Amazon) are profiting—but can downstream monetization follow? Are B2B enterprises genuinely boosting productivity? Has a ‘super app’ or ‘super device’ emerged in the AI era—akin to the iPhone, WeChat, Meituan, or TikTok in the mobile internet era? Currently, visibility is relatively high on the B2B side: February’s so-called “SaaS apocalypse” reflected how fragmented AI agents powered by large models are indeed displacing parts of traditional software. On the B2C side, however, no such breakthrough application or hardware has yet emerged. 2. Medium- to short-term risk: What impact will persistently high oil prices (above $100/barrel over the long term) have on the real economy? Morgan Stanley estimates that if the Strait of Hormuz remains blocked until end-June, the S&P 500 could fall as low as 5,500 points (currently at ~7,100).

Surging 51-fold! BASF and Dow’s Q2 financial results stage a dramatic turnaround—among global chemical firms pursuing ‘slimming down and upgrading quality,’ who stands out as the top performer?

Dow’s Q2 net profit of $802 million excludes non-recurring gains such as asset disposals and government subsidies—entirely attributable to expanded polyethylene price spreads and internal cost-cutting. This reflects genuine improvement in core operational capability, with earnings exhibiting sustainability. In contrast, BASF’s €4.1 billion net income includes €3.5 billion from the sale of its coatings business; stripping out this one-off gain leaves only ~€600 million in core operating profit—masking underlying pressure on operating cash flow. 2. A tale of two cash flows: Dow’s smooth cash inflow vs. BASF’s strained operating cash flow Dow’s Q2 operating cash flow reached $1.324 billion—sharply turning positive year-on-year. Higher pricing directly translated into gross margin gains and then into operating cash, supported by healthy inventory turnover. BASF’s operating cash flow plunged €1.1 billion year-on-year, primarily due to rising raw material costs increasing inventory-related working capital by €654 million and extended accounts receivable tying up an additional €843 million. Upstream cost pressures and lengthened downstream payment terms have clearly weakened its operational cash-generating capacity. BASF relied solely on the €5.6 billion net cash inflow from the coatings divestiture to improve investment-side metrics—its free cash flow turned negative. Day-to-day operational funding pressure is markedly higher than Dow’s—a pain point shared across European chemical firms: rigidly high energy and raw material costs, coupled with weaker working capital efficiency compared to North American ethane-route producers. 3. Divergent regional cost foundations: North American ethane route dominates European naphtha route The most fundamental gap lies in feedstock cost structure: Dow concentrates core capacity in North America, where cheap, abundant ethane confers strong cost advantages—advantages further amplified by the current Middle East geopolitical conflict, as naphtha-cracking producers face rising costs while ethane-based producers enjoy expanding margins. BASF anchors its core capacity in Europe, enduring triple pressure from high electricity prices, carbon taxes, and expensive naphtha. Even with product price hikes, its gross margin recovery lags behind North American peers. This regional cost gap directly shapes long-term industry structure: Global chemical investment in 2026 continues shifting toward integrated refining-and-petrochemical hubs in North America, Southeast Asia, and China—while European domestic capacity steadily exits. This industrial relocation trend is irreversible. Three clear trends shaping the global plastics & chemicals industry in 2026: Trend 1: Cyclical recovery is structural—not broad-based demand revival—and geopolitical tailwinds are short-lived. Whether Dow, BASF, or China’s private refining-and-chemical firms, the core driver behind this earnings surge is supply contraction-induced price hikes—not explosive downstream demand growth. Dow’s overall Q2 sales volume declined 1% year-on-year, with packaging plastics down 4%; BASF saw only partial volume growth, with surface treatment technologies posting slight declines. As Strait of Hormuz navigation gradually normalizes, polyethylene prices in the Americas have already retreated since June. Dow’s management warned that Q3 profitability will moderate due to planned plant maintenance and seasonal softness. The excess-profit window generated by geopolitical shocks is finite; medium- to long-term industry profitability will revert to supply-demand fundamentals—where the pace of recovery in downstream consumption, real estate, and packaging demand ultimately determines the sector’s long-term ceiling. Trend 2: The global chemical industry has entered an ‘asset restructuring era,’ where divestitures, shutdowns, and layoffs have become routine. In past cyclical troughs, firms typically responded by cutting output or deferring maintenance to weather downturns. In 2026, global giants uniformly pivot toward permanent asset optimization: selling low-margin businesses, shuttering aging facilities, implementing large-scale layoffs, and slashing capital expenditures.

Dow Inc. Shares Surge 868 Points Amid Strait of Hormuz Reopening Expectations

Apr 17, 2026

Dow Inc. shares gained 868 points on the 17th, attributed to expectations of the Strait of Hormuz reopening. The event highlights potential impacts on global shipping logistics for chemical commodities.

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Dow Inc. Shares Surge 868 Points Amid Strait of Hormuz Reopening Expectations

Dow Inc. Shares Surge 868 Points Amid Strait of Hormuz Reopening Expectations

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