Last Week
Wall Street heard a few measures of a peaceful, easy feeling, and the market did not let us down, with all the major indexes posting significant gains. Once again, it was the war narrative that moved the markets. The verse of “a whole civilization will die tonight” modulated to a wishful chorus of “we are going to have a two-week cease-fire” on Tuesday evening, and the buyers came out of the woodwork in droves. The S&P 500 gained 3.6%, the Nasdaq Composite jumped 4.7%, and the Russell 2000 rose 4.0%. Advancing issues more than doubled declining issues, with the Industrials and Consumer Services sectors topping the leaderboard, while the Telecommunications and Oil & Gas sectors lagged.
That peaceful, easy feeling led to a sell-off in oil prices, as WTI Crude tanked by more than 14%, slipping to about $95.50 per barrel. It is still up over 50% from earlier in the year and 5.5% from a month ago. Gold prices bounced as the Dollar slipped and the yield on the 10-year Treasury held steady at 4.3%.
The economic news began to reflect the pain the war and other policies are causing, as the March ISM PMI came in lower than expected, consumer inflation expectations increased, and the Core PCE Price Index rose slightly above consensus month-over-month. In addition, the U.S. Consumer Sentiment Index came in at 47.6 for April, down from the 52.0 consensus, according to preliminary data from the University of Michigan Survey, which marks a level even lower than that reached during the darkest days of the pandemic.
The current situation reminds us of the lyrics from another song from the Eagles’ 1972 album:
“We have brought our children here
Who can save them now?
Oh, Weeping woman try to smile
Like the coming dawn
Most of us are sad it’s true
Still we must go on.”
The financial markets are expressing optimism. Let us hope that proves justified.
There is absolutely no reason for optimism on the Chicago Sports Scene this spring, with the White Sox and Cubs both in last place, while the Blackhawks and Bulls both finish their seasons out of the playoffs.
This Week
The weekend negotiations in Pakistan between the U.S. and Iran ended without an agreement. Donald Trump says a US blockade of Iranian ports will begin Monday at 10 AM ET. This action could put the ceasefire at risk. Further developments in the war will dominate the action in the financial and commodity markets.
Earnings season kicks into gear with the major banks’ results. There will also be inflation data and a heavy slate of Federal Reserve commentary.
In addition to the banks, we will get results from Taiwan Semiconductor, Netflix, and PepsiCo, which will offer insight into global demand, tech spending, and consumer trends.
The March Producer Price Index on Tuesday will provide signs of any pass-through from recent oil volatility.
The stocks mentioned above may be holdings in our mutual funds. For more information, please visit www.nsinvest.com.