Stocks Exhibit Strong Gains on Perceived Agreement with Iran; Bonds Also Gain
Good morning,
The Dow (+3.2%), NASDAQ (+6.8%), S&P 500 (+4.5%), and EAFE (+2.2%) all exhibited strong gains for the week. While the gains weren’t nearly as sharp, taxable bonds also rose 0.6% and tax-free municipal bonds added 0.3%. The 10-year Treasury yield fell 0.08% to finish the week at 4.24%.
With a cease fire at hand between the US and Iran, stocks gained for the week, but those gains nearly doubled on Friday as Iran announced that it would open the Strait of Hormuz to allow for the flow of oil and other goods out of the Persian Gulf. The week ended with the NASDAQ and S&P 500 erasing their losses from March and hitting new all-time highs. The indices’ movement last week essentially showed the recovery of those stocks that got punished the most during March.
For weeks, we’ve been saying that the Middle East conflict has taken center stage and has been masking all other economic news. So, looking beyond those headlines, the Producer Price Index (PPI) was released and showed a gain of 0.5% over the prior month, but far less than the 1.1% expected. That caused significant enthusiasm among investors, causing gains in the earlier part of the week. The Fed Beige Book was also reported, and 8 of the 12 US regions showed an increase in economic activity. Further, the report noted that AI isn’t rapidly replacing workers, but is allowing companies to put off hiring they may have previously done. That was also interpreted favorably by investors.
We are now entering the teeth of quarterly corporate earnings, but those earnings reports may continue to be masked by the US / Iran conflict, as the ceasefire is due to end this week. So long as that continues to dominate the headlines, we can expect normal economic data to be masked. That said, it is very encouraging to see the markets rally to all-time highs when there appeared to be a deal to keep the Strait of Hormuz open for commercial shipping traffic.
Have a great day and week. Please note that we will produce an economic update with Brad Sorensen, CFA, on Wednesday. Please check out our website, social media, or YouTube to tune in for that 30-minute Financial Planning Explained episode.
Source: Yahoo Finance
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