Trump says Iran war "close to over" amid hopes for more negotiations
Stocks have now fully recovered to pre-Iran conflict levels. The S&P is now only 65 points from its February all-time high. The other major indexes aren’t far behind. The VIX has fallen to 18 from 31. Credit spreads are falling. All this while there is no ceasefire with Iran, and the status of the Strait of Hormuz remains uncertain. The primary explanation is that earnings estimates have not been cut, with double-digit growth still forecast for 2026.
While crude oil and distillates remain very elevated from pre-Iran conflict levels, investors are willing to see the energy situation as temporary. It doesn’t hurt that the U.S. is the largest oil producer in the world, plus now has control of Venezuela’s oil, the largest reserves in the world (albeit mostly "dirty", not "light" crude oil). Picking up the slack of shuttered Middle East production accrues to the U.S.
Tech has been the real star in this recovery. Tech just had its strongest 10-day move in 25 years and the best week since the COVID-19 vaccine was released in December 2000. The Magnificent 7 is up 14.2% off the bottom. The AI narrative is alive and well. There remain concerns as to the ability to supply the energy demands of the hundreds of data centers being built, but that is creating opportunities. Bloom Energy (BE), a fuel cell provider, is up 80% in April (+146% YTD) after expanding its business with Oracle’s data center plans.
The market rally has spread to precious metals, with gold back above $4,800/oz, silver knocking on the door of $80, and copper above $6. Even Bitcoin has gotten legs, hitting above $76K briefly today for the first time in a month.
Today we got PPI data for March, which was much lower than forecast, expected to spike over higher oil and gasoline prices. Headline PPI was only +0.5%, flat with February, not the +1.1% forecast. Core PPI was even better, down from February’s +0.3% to +0.1% instead of the +0.4% forecast. PPI ex food/energy/transport fell from +0.5% to +0.2%. The U.S. Treasury market liked these numbers, and interest rates are down modestly.
Earnings season has kicked off with solid results: JP Morgan (JPM), J&J (JNJ), Citigroup (C) and BlackRock (BLK) all reporting beats top and bottom. Wells Fargo (WFC) had a beat on the bottom and a small miss on the top. Tomorrow, we get Bank of America (BAC) and Morgan Stanley (MS), Thursday is Taiwan Semi (TSM), Netflix (NFLX), and PepsiCo (PEP).
There’s no meaningful news coming out of Iran, but WTI crude oil is down to $93/bbl. While the situation could heat up again, dip buyers have been handsomely rewarded once again, and we should not see similar downside volatility.
The focus is now on earnings. The trend has become very positive.