Hello, I'm Eric Criscuolo, Market Strategist at the New York Stock Exchange, and this is Market Storylines. Every week we’re here to keep you up to date on the key trends and events driving global markets. We’re recording this on Thursday, April 16. Now let’s dive in.
What do you get when begin a war with Iran and then wait seven weeks? Record highs for the S&P 500, apparently.
We started last week with President Trump threatening to obliterate Iran if a peace deal wasn’t reached and Iran responding by threatening to send the Middle East into the darkness. But out of that darkness, a ceasefire emerged.
Michael wove the market history tapestry last week by noting this last minute, 15-day ceasefire announcement by Trump coincided with the 1-year anniversary of the tariff policy pivot that triggered an historic 10% intraday reversal in the S&P 500. We’ll get to why that was more than a fun stat in a moment.
Stepping back, but not too much because we’re 20 feet above the NYSE trading floor, the S&P fell for five straight weeks starting with the week the Iran war began. March 30 saw the bottom put in, and since then the S&P has gained over 10% as of this filming, erasing all of that drop and then some.
7000 had been a hard ceiling for the index since January, never being able to close above it. Yesterday we did, setting all-time closing and intraday highs. The market action is brought to you by the letter V. As in V-shaped recovery. Oh, and it wasn’t just records in the US. Japan’s Nikkei index reached its own record high.
Since those March 30 lows, it’s been an interesting mix of mega caps, semiconductors, consumer discretionary and small caps leading the charge higher. Most recently, the software group, which was under assault well before the missiles started flying in Iran, has started to bounce off its lows as well.
Thematic, higher-risk and retail favorites have been a big part of the recovery. Most of the ten or so quantum computing stocks that we track are up 20-50% since the beginning of the month. Same with the neo cloud providers and bitcoin miners pivoting to high performance data centers. Most of the mega-cap tech names are up over 10%. The private capital asset managers that have been under pressure, like Blue Owl and Apollo, are up around 15%.
This week Tech and Discretionary are leading higher with the Growth factor significantly outperforming Value. Mega Cap tech names are genreallyup 5% or more. The IGV software ETF is up over 10% and travel and leisure names have seen strong bounces. The S&P is up 3% so far this week.
Michael’s call back last week to the tariff recovery shines a bright light on one of the main reasons the S&P 500 set new records this week. The breakneck recoveries after the COVID and the tariff selloffs, coming during the larger, roughly 100% gain since October 2022 have conditioned investors to stay in the market, buy the dip and respect the FOMO.
Expectations were tested but generally fell into the camp that the Iran situation would move closer to normalcy, rather than explode kinetically. Investor hedging also helped as downside protection was in place. The decline in crude prices, from around $110 to the mid 90’s, was a major tailwind. As was the volatility compression across equities and treasuries. Both the VIX and MOVE indexes have been almost cut in half from their highs in late March, allowing systematic programs to reengage. Yields have also generally come in from their highs, easing conditions.
Q1 earnings season has begun, shifting some of the focus from macro to fundamentals. So far the major banks have reported solid results, haven’t waived any red flags on consumer health or credit issues and are optimistic on the economy- providing further support for equities.
Management teams have also expressed plenty of caution as well. The potential of the Iran situation to deteriorate again is clear. The impact of AI remains a huge question mark, not just for the outlook of sectors, like software, but also economically for employment and production. While oil has come off its highs, Brent crude remains very elevated at around $100 and is up 5% this week on today’s move higher, indicating everything may not be as rosy as the equity market thinks.
Looking ahead, the Q1 earnings train continues. Financials will continue to dominate the opening leg of the cycle but a broader set of companies will begin to report, including 3M, Proctor and Gamble, defense contractors, IBM, Tesla, Blackstone, Vertiv, Caterpillar, Intel and American Express. SAP and ServiceNow will also report and should gain a lot of attention as the market looks to gain insight into AI disruption in the software space. Flash PMIs and Retail sales will headline an otherwise light economic calendar. Pending Home Sales and weekly jobless claims will also be reported. The Fed goes into their blackout period this weekend, until the last Fed meeting with Jerome Powell as Chair- unless he stays in place as Chair pro-tempore if Trump’s nominee Kevin Warsh fails to get confirmed by the Senate in time. But Trump just threatened to fire Powell, again, if he stays on after his regular term ends. The Senate Banking Committee has scheduled a confirmation hearing for Warsh on April 21. You can think about all this as you sit back and watch the NBA and NHL playoffs kick off.
That’s a wrap for this week. You can watch Market Storylines on TV.NYSE.com or on the NYSE YouTube Channel. You can also listen on the Inside the ICE House Podcast feed. Thanks for joining me. I’m Eric Criscuolo. We’ll see ya next week. Go Knicks!