Stocks and Bonds Mixed on Iran War and Good Economic Data
Good morning,
The Dow (-0.4%), NASDAQ (+1.5%), S&P 500 (+0.6%) and EAFE (-2.7%) exhibited mixed results last week. Similarly, taxable bonds were down 0.3%, while tax-free municipal bonds were flat to up fractionally. The 10-year Treasury yield rose 0.06% to finish the week at 4.30%.
More of the same as markets react to the Middle East conflict with Iran, mainly due to the restriction of oil flow through the Strait of Hormuz, which represents 20% of the global oil supply. Oil prices continue to remain elevated, and those prices, as well as stocks, continually respond to rumors of peace talks and the re-opening of oil transport. However, as we enter the teeth of quarterly corporate earnings season, some upside surprises have bolstered certain sectors, particular the semi-conductor sector, or the chip manufactures. Specifically, Advanced Micro Devices and Intel were up 25% and 20% last week, respectively. In general, corporate earnings have bested already elevated expectations, and forward-looking guidance has been positive. Companies mentioning the Iranian conflict are noting that it could cause issues, but their businesses will hold up.
Economic data reported last week was fairly strong. Retail sales rose by a better-than-expected 1.7%, which included the rise in gasoline prices. Stripping that out, retail sales still rose a healthy 0.6% over the prior month. Weekly jobless claims rose slightly, but the 4-week average remained roughly the same. In summary, the economic data demonstrates that the economy and labor markets are still holding strong.
In the week ahead, four of the seven Magnificent 7 stocks (Apple, Meta, Amazon, and Microsoft) will be reporting their earnings. In a report from the Chicago Booth Review, the top 1% of corporations represent 90% of the overall earnings. This further explains why the markets have been dominated by such a small handful of companies over the past few years, mostly in the technology industry. So, given that 3 of the top 4 and 4 of the top 7 companies (by market cap) are reporting their earnings this week, they could definitely have an impact on the markets. Further, four of the world’s largest banks (US, England, Japan, and Europe) are meeting separately this week, so there is a lot of potential for market movements to occur.
Have a great day and terrific week!
Source: Yahoo Finance
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