Markets Fully Erase Iran War Losses as S&P Reclaims Pre-Strike Highs- Business Briefing
By Kenny Polcari
Things you need to know –
- Markets came back from the dead.
- The S&P 500 has now erased EVERY SINGLE POINT of loss since the Iran war began February 28th.
- Goldman crushed it. Stocks sold off anyway. Classic Wall Street.
- Oil surged — WTI trades at a high of $105.63. Gold slipped. Bonds rallied.
- VIX closed at 19.12 — back below the cautious zone.
- Software saved the day. Oracle +9%. Palantir +3%. IGV +5.5%.
- PPI at 8:30 this morning. JPM, C and WFC all before the bell. Strap in.
**I am on with Maria Bartiromo today from 6-9 am on Fox Business – Join us**.
Let’s start with where we were yesterday morning versus where we ended up — because that story tells you everything.
Futures were a disaster overnight (Sunday). The blockade news hit hard. Dow futures were off more than 500 points. S&P futures down over 40 pts. The VIX spiked to 21.58 – just below trendline resistance at 22.50 – It looked and felt ugly. And then — the whole story changed….
By the close, the Dow added 301.68 pts or 0.6%, the S&P jumped 69 pts or 1% to end at 6,886.24 – keep that in mind because I’m coming right back to that. The Nasdaq added 280 pts or 1.23%, the Russell ended up 40 pts or 1.5%, the Transports led the group – adding 502 pts or 2.5%, the Equal Weight S&P added 92 pts or 1.1% while the Mag 7 surged – adding 315 pts or 1%. Not bad for a morning that looked like a disaster at 6 am.
So, let’s go back to look at the S&P because this really matters – yesterday the S&P ended the day at 6,886.24 – 7.36 pts greater than 6,878.88 – which leaves me to ask you – Do you know what that number was? That was the S&P’s close on Friday February 27th, the day before we knocked on Ayatollah’s door with one of those ‘bunker buster bombs’! Yesterday, we closed above it.
Every single point that we lost since then has been recovered. At its worst, the S&P had fallen 7.8% from that pre-war level, bottoming out on March 30th as oil surged 51% in March alone and inflation expectations went through the roof. Bond yields kissed 4.5% and 5% respectively. Any talk of rate cuts were replaced with possible rate hikes, the VIX surged by more than 98% and six weeks later — after the deaths 3 layers of leaders and a naval blockade of every Iranian port in place, oil still above $104 and no signed deal on the table — we are all the way back.
As Steve Sosnick, chief strategist at Interactive Brokers put it — “Momentum driven traders are too loath to miss out on a rally to worry about what is driving it.” And he is right. The rebound has happened faster than almost anyone expected. The catalyst was the tentative ceasefire announced once week ago – yesterday’s push higher came after Trump told us that Iran had reached out ‘suddenly’ wanting to talk and Davey Solomon – GS CEO suggested during his earnings call that the selloff in software stocks had been overdone. That was enough to send the ‘Momo’ guys into a frenzy and up we went.
Now of the 11 S&P sectors – Tech – XLK – took the lead – up 2.1% – The iShares Expanded Tech-Software Sector ETF – IGV – had its best day in a year, up better than 5%. ORCL popped over 9%. CRM surged nearly 5%. MSFT added 3.6%. Semi’s added 1.7%, Disruptive Tech gained 3.8%, the Growth Trade – SPYG rose by 1.2%, Cyber up 4%, Ark Web added 3%.
Then it was Financials – XLF – up 1.7%, Consumer Discretionary up 1%, Industrials and Communications rose 0.7%, Healthcare, Basic Materials and Real Estate gained 0.45%, Energy rose 0.3% while Consumer Staples and Utilities (both more defensive in nature) lost 1% and 1.2% respectively.
We saw strength in Homebuilders up 1.6%, Retail up 0.6%, Metals & Miners up 1.2%, Aerospace and Defense up 2.2%, Nuclear up 1.7%, Biotech’s up 2%, and the list goes on…..
And don’t forget earnings…
Goldman posted record equities trading revenue for the first quarter. EPS of $17.55 vs. expectations of $16.49, on revenues of $17.23 billion versus $16.97 billion expected. Investment banking fees climbed 48% to $2.84 billion — about $340 million better than expected — on a surge in completed M&A transactions.
A blowout quarter by any measure. AND the stock sold off! The issue was Goldman’s fixed-income trading revenues — about $4 billion, which was $900 million BELOW estimates. Davey attributed the miss to weakness in interest rate products, mortgages, and credit.
And then – remember what I told you yesterday – ‘pay attention to what these guys do with their LOAN LOSS Reserve acct’ because this will tell you a lot!
Goldman’s provision for credit losses (loan losses) ROSE nearly 10% from a year earlier, more than double the estimate. The biggest increase since 2020. Read that again…. And while Davey Solomon didn’t want to sound like he was ringing the alarm bell — he is quietly building a larger reserve acct. Pay attention to that. And remember — Goldman just gave Q2 EPS guidance of $13.75 on revenues of $15.71 billion. A meaningful step down from Q1. Hello?
The stock closed down $17 or 1.9% on the day despite the beat.
Now — the other markets.
Oil — WTI surged back above $104 on the blockade news and held there. The market is now pricing in the reality that Iranian barrels are off the table indefinitely. Watch the April and May CPI prints — they are going to be something else entirely with oil at these levels.
Gold — slipped $10 to settle at $4,740/oz. The logic is simple — if energy stays elevated and central banks are forced to hold or raise rates, gold faces a headwind. We talked about this. Nothing has changed.
Bonds — The TLT and TLH both rose by 0.3%. The 10-year Treasury closed yielding 4.297%, down 2 basis points on the day while the 30 yr yield closed yielding 4.89%.
VIX — The VIX closed at 19.12, down slightly on the day – putting us back into the cautious zone. Let’s see if it holds.
What to watch today – because it is going to be a BIG Morning
Set your alarm. There is a lot hitting us all at once.
March PPI — 8:30 AM ET. This is the number that matters most this morning. After Friday’s hot CPI print — headline up 0.9% for the month, 3.3% year over year — the street is bracing for an equally ugly wholesale number. Expectations are for the PPI to rise 1.0% in March — which would be the strongest monthly rise since March 2022. Energy is driving it — expect a 10% surge there. Core PPI ex food and energy is expected up 0.5%. Here is what really matters —inflation in services remains elevated, and higher prices as a result of tariffs coupled with higher energy prices are clear upside risks going forward. If this number comes in hotter than expected, bonds are going to sell off hard, yields will spike and stocks are going to feel it immediately. This print has the potential to set the tone for the entire session before the opening bell.
Then it’s about earnings…JPMorgan (JPM) — The street is expecting $5.41 per share on revenues of $48.2 billion, up 6.7% and 6.4% year over year respectively. What the market wants to hear is what Jamie says. His shareholder letter already warned about stagflation risk, oil price shocks and a credit environment that could deteriorate quickly. Watch his loan loss reserve commentary. Watch his tone on Q2 guidance. If Jamie starts sounding cautious that will matter more than any number on the page.
Citigroup (C) — Jane Fraser’s turnaround story continues. The street is expecting EPS growth of 34% year over year on revenues of $23.6 billion, up 9%. The investment banking division has been on a tear. Citi is actually the relative outperformer in this group year to date — if she delivers and guidance holds; this one could be an upside surprise.
Wells Fargo (WFC) — EPS of $1.57 on revenues of $21.85 billion, up roughly 8% but again, pay attn to the guidance.
So, between PPI and three major bank reports before the bell, this morning has the opportunity to move markets before most people finish their first cup of coffee.
European markets are up across the board…
US futures are up as well. Dow futures up 70, S&P’s up 12, The Nasdaq up 86 while the Russell is up 3.
The S&P closed at 6886- up 69 pts…. The war losses are gone. Tom Lee of Fundstrat said it plainly on CNBC’s Power Lunch — “The market does have a really good way of discounting outcomes. And I think the reason it’s going up is we’re gonna end up with a favorable outcome.” Maybe. But I’d remind you — the ceasefire expires in nine days, Iran hasn’t blinked on nuclear, and we have a very full plate this morning.
Take good care,
Kp
Kenny Polcari is a partner and Chief Market Strategist at Slatestone Wealth – A boutique wealth advisory firm with $2 billion dollars of investor assets under management. In this role, his responsibilities range from market and economic analysis to investor education interpreting the ever changing economic and market landscape on behalf of Slatestone and how those impacts may affect future investment and planning strategies on behalf of their clients. With more than 40 years of industry experience as a member of the NYSE serving institutional investors both at home and abroad – he is a seasoned and well-known voice on the markets. You may recognize him from his many years serving as a market analyst on Fox Business and CNBC or his ‘Trader Talk’ Podcast on the Yahoo Finance Channel. For more, please visit his Substack HERE.
Disclaimer. Source: Bloomberg, CNBC, Reuters, Wall Street Journal
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