Market Story Lines
Hello, I'm Michael Reinking, Senior Market Strategist at the NYSE, and this is Market Storylines. Every week we are here to keep you to date on the key trends and events driving global markets. We are recording on Thursday afternoon hour in another week full of Iran headlines, a barrage of earnings reports and on the eve of some key economic data. So let’s dive right in….
Last week Eric walked you through Space Week here at the exchange which wrapped up with a visit by the Artemis 2 crew to the trading floor on Friday. In a continuation of that theme earlier today Hawkeye 360, a signal intelligence and satellite, became the newest addition to our community of listed companies after their successful IPO. Congratulations!
Last week, the S&P the S&P 500 closed out the month of April up >10% on a 5-week winning streak closing at new all-time highs. With the historic rally we’ve seen recently some might even say stocks are going to the moon.
Despite moving to all-time highs, it hasn’t been easy as investors have had to overcome the cognitive dissonance of the potential negative outcomes related to the Iran conflict and higher energy costs offset by the acceleration of earnings growth primarily driven the AI related Capex Boom.
Iran was back in focus coming out of the weekend after President Trump announced Project Freedom, a plan to guide stranded ships out of the Strait of Hormuz. Iran didn’t take kindly to the announcement on Monday. An Adnoc ship was hit by Iranian drones in the Strait and then the UAE was struck by missile attacks. Oil prices moved back toward recent highs and equity markets pulled back modestly as the durability of the ceasefire was drawn into question.
However, those losses were quickly reversed on Tuesday as there was no immediate response by the US overnight. And in a press conference ahead of the open General Caine and Secretary of War Hegseth, said the Iran attacks were below the threshold of restarting major combat operations. Tuesday evening President Trump announced he would pause Project Freedom as there had been “Great Progress” in discussions with Iranian leadership which was later followed by reports from Axios, that the administration was getting close to an agreement with Iran on a one-page memorandum of understanding to end the war and set a framework for more detailed nuclear negotiations. This sent oil prices sharply lower and markets to fresh all-time highs. Markets are still waiting for any official announcement as there were reportedly a couple of points that need to be hashed out leading to a choppy session today. And right before I came on the WSJ reported that Project Freedom could restart as early as this week as Saudi Arabia agreed to re-open access to military bases which has causing oil prices to reverse earlier losses and equities to pullback. ICE Brent is down over 5% for the week hovering around $100/barrell after having traded as high as $115 on Monday.
As we’re recording on Thursday afternoon the S&P 500 is looking to extend its winning streak, to 6 consecutive weeks, currently up ~1.5%. As we’ve discussed, a big reason for the continued strength is earnings season, which has been one of the most impressive that I can recall. The number of the day is 85, as 85% of companies in the S&P 500 have reported to date, and 85% of those have beaten estimates, driving the blended growth rate for Q1 earnings to >25% on a y/y basis more than 2X the estimate coming into the reporting season. There is one sector that has stood head and shoulders above the rest during this reporting season, and as the late iconic John Sterling would have said, The Semis win! The Seemmmmmmis Win!. Our thoughts and prayers go out to his family and friends and he will always hold a special place in the hearts of Yankees fans.
Technology is once again the standout with the NSYE 100 index up >3% for the week. Earnings growth in the sector is up ~50% on a y/y basis after multiple years of 20% growth, with the semi sub sector up ~100%. I cannot think of another time in my career where we’ve seen this type of earnings growth that has not come following an earnings recession. In semis/memory there has been another round of just eye-popping earnings and despite the already elevated expectations we continue to see many of the stocks moving sharply higher in response. The sector is down 3% today but the nyse semi index is still up >5% for the week and over 60% YTD. The software sector has also had a round of solid results this week helping to quell some of the recent fears.
Away from the tech heavy sectors, industrials is one of the few trading higher this week. There has been a mixed response to some of the aerospace and defense earnings but companies levered to the data center buildout and automation have had very strong results. Airlines have been helped by the drop in oil prices but there has been some weakness in other logistics/transportation stocks after Amazon announced it was launching Amazon Supply Chain Services. Energy and Utilities have been the big underperformers for the week.
The biggest economic release of the week is still in front of us but thus far this week’s data continues to point to a resilient economic backdrop. ISM services held steady from last month, claims remain low on an absolute level and Wednesday’s ADP employment report was better than expected. Markets are looking for a moderation of job gains in tomorrow’s BLS report. There has been quite a bit of volatility in the headline nonfarm payrolls numbers over the last few months with estimates looking for 60k jobs to be added to the economy down from ~175k last month while the unemployment rate is expected to hold steady at 4.3%.
Next week the economic data shifts to inflation data. Earnings will continue to be busy but will be less impactful going forward until we start to get late cycle tech and retail earnings later this month. The Middle East will remain a focal point with the timing of the negotiations quite interesting ahead of President Trump’s visit to China late next week. He has reportedly invited CEOs from major US companies including Boeing, Citigroup, Exxon, Visa, Nvidia and Apple to join.
That’s going to do it for this week thanks for spending some time with us. If you liked today’s episode, please tell a friend or leave a comment wherever you listen to your podcasts. I’m Michael Reinking and we’ll talk to you again next week.