Last Week
It was a “risk on” party across the financial markets. The S&P 500 gained 4.5%, the Nasdaq Composite rose 6.85, and the Russell 2000 added 5.6%. Advancing issues more than tripled the number of declining issues, as the Technology sector soared 8.4% while the Oil & Gas sector sagged 3.6%. The bond market also rallied, with the yield on the 10-year Treasury slipping 8 basis points to 4.25%. Additionally, with “risk on” in the air, Gold bounced while the Dollar drifted lower.
Once again, the war narrative dictated the tone of the financial markets, though it was aided by a bounce in software stocks and strong earnings reports from the big banks.
The market opened Monday with a cautious tone following the negotiations in Pakistan that ended without a peace deal. Additionally, President Trump ordered a blockade of Iranian ports, suggesting the tenuous nature of the current ceasefire. During the week, there was a flow of conflicting information out of the Middle East, which the market interpreted in the most positive light. We embrace the efficient market hypothesis, a financial theory that asserts that asset prices, particularly stocks, reflect all available information. The surge to new highs for three consecutive days to wrap up the week, embracing the narrative that the Strait of Hormuz was “completely open” for all commercial vessels, that Iran had agreed to end its nuclear program indefinitely, and that a final peace deal was imminent. The biggest loser was Crude oil, as WTI fell around 11.4% to settle at $85, and Brent futures also dropped 3.5% to $91 per barrel. Other reports have deemed the Strait of Hormuz closed, and Iran has not confirmed the nuclear deal or the immediacy of a peace deal. Let’s hope the market is pricing in all this information correctly.
The economic news was positive as the March Producer Price Index came in below consensus, and the Philadelphia Fed Manufacturing Index unexpectedly rose in April.
On the Chicago Sports Scene, the Cubs played a solid week of baseball, although their pitching staff is suffering a series of injuries. The sun is not shining on the South Side, as the White Sox’s pattern of winning one game and losing two has them back in the cellar.
This Week
Geopolitical developments and corporate earnings will drive trading.
Earnings season accelerates, with approximately 90 S&P companies reporting results, including Tesla, IBM, Texas Instruments, Boeing, and American Express.
Economic data will include the March retail sales report on Tuesday and the University of Michigan consumer sentiment reading on Friday.
The stocks mentioned above may be holdings in our mutual funds. For more information, please visit www.nsinvest.com.