What we learned last week:
“That jukebox in the corner blastin’ out my favorite song, The nights are getting warmer, it won’t be long, Won’t be long ‘till the summer comes, Now that the boys are here again.” The Boys are Back in Town, Thin Lizzy, 1976
Buyers showed up last week driving Wall Street’s indexes to post gains for the second week in a row.
Working with regional partner Pakistan, US and Iran agreed to a 2-week ceasefire ahead of President Trump’s 8 p.m. deadline Tuesday evening. Oil prices plummeted on the news and stock market future rose more than 2%. U.S. indexes ended sharply higher Wednesday, the first trading day after the news broke. The Dow Jones Industrial Average closed more than 1,300 points higher, or 2.9%, tech-heavy Nasdaq Composite, and benchmark S&P 500 closed up 2.8%, and 2.5% respectively.
WTI crude, the U.S. oil benchmark dropped 15%, the biggest one-day decline since 2020 and Brent crude, the global benchmark, fell 13% as optimistic sentiment swept markets.
Investors ignored the subsequent back and forth between the countries as Iran accused Israel of violating the ceasefire deal with attacks on Lebanon. Ultimately, optimism a cease deal will hold was enough going into the weekend’s negotiations between the three countries in Islamabad, Pakistan.
The backdrop at home is the economy and impacts of an energy crisis on inflation and growth. Jamie Dimon, in his annual letter to JPMorgan Chase shareholders, warned inflation, debt and war are weighing on the U.S. and global economies.
Looking at interest rates and inflation, last week investors digested March meeting minutes from the Federal Reserve which showed a consensus of officials anticipate one rate cut this year. Officials also expressed concern that the Middle East hostilities could result in sustained inflation that could require rate hikes.
The first inflation report since the war in Iran began was released last week. March’s Consumer Price Index (CPI) rose in line with consensus expectations, even with energy costs surging 10.9% from February. Stripping out volatile food and energy, core prices rose a tame 0.2% for the month.
This week will be packed full of events. Key inflation indicator and the Fed’s Beig Book will provide indications for economic growth. Corporate earnings pick up this week with banks starting the second quarter earnings season.
Ultimately it is news coming out of Iran that is most likely to move markets this week. US and Iran failed to reach an agreement in Pakistan over the weekend, which has led to a U.S. blockade in the Strait of Hormuz, scheduled to start at 10 a.m. Monday. The change in course has dimmed hopes that the war would end in the coming days, causing oil prices to rise and U.S. index futures to fall.
What’s ahead this week:
Economic Events
- Producer price index (PPI) report will be viewed for impacts of energy prices. PPI measures the average change over time in selling prices received by domestic producers for their output.
- The Fed Beige Book will be released Wednesday is a summary of current economic conditions in each District through reports from Bank and Branch directors.
- Initial jobless claims will continue to play in important roll as investors look for signs of a weakening labor market.
Earnings
- Big week for bank earnings with many of the country’s largest banks reporting. Also, the technology sector has several key players reporting this week.
- Goldman Sachs
- JP Morgan Chase
- Wells Fargo
- Citigroup
- BlackRock
- Bank of America
- AMSL (semiconductor equipment systems developer)
- Taiwan Semiconductor Manufacturing (manufacturer of circuits and semiconductors)
My goal is for you to feel educated and informed about variables we do and don’t have control over and find ourselves working within. I hope to do it in an informative and relatable way. As always, I value your relationship and planning objectives – my door is always open for conversation.
