A momentum change for stocks and oil, plus what earnings results are telling us.
I have always enjoyed a tuna melt sandwich. I think when I was in second grade I had one every day for lunch. This goes to show how committed I can be and apparently also how comfortable I am with risk-taking, as my eight-year-old self was definitely throwing caution to the winds on mercury poisoning with that diet. But who among us can resist a sandwich when it has bubbly, melted cheese on top?
After a full-on March market meltdown caused by the Iran war and the resulting spike in oil prices, April markets have sprung back in a big way with the kind of delicious melt up that investors are savoring as much as I did my tuna melts.
This week’s Iran war headlines included a dual-sided blockade, with the U.S. Navy blocking ships from entering or exiting the strait in the hopes of stalling all revenues to Iran while Iran continued to hold firm on its “controlled navigation” tactic such that all traffic was at nearly a complete standstill. These tactics, following the breakdown of peace negotiations last weekend, are now yielding reports of a nearer-term resolution to the conflict and a reopening of the Strait of Hormuz. Meanwhile, Israel and Lebanon, along with Hezbollah, announced a ceasefire Thursday.
Two weeks ago, this would have seemed unlikely with stocks battered, bruised and near eight-month lows. But with oil prices on the retreat (West Texas crude is down to $84 a barrel and Brent crude is priced $90 a barrel) and earnings reports impressing investors, stocks have a tailwind that has pushed the S&P 500 Index and Nasdaq Composite to new all-time highs.
Earnings from big banks over the last few days reassured investors that, despite the war, the U.S. economy remains on relatively solid footing. Banks and financial services companies reported blockbuster results, thanks to capital markets revenue from trading, M&A and underwriting, and it was a good sign that several banks lowered their provisions for loan losses, meaning they see less need for heavy amounts of cash on hand to guard against defaults on loans.
Meanwhile, the flow of money related to tech mega-caps and AI infrastructure stocks is picking up steam from this year’s earlier stumble. Semiconductor companies such as Nvidia, Taiwan Semiconductor, Advanced Micro Devices and Intel are surging. Mega-caps like Microsoft, Amazon, Alphabet and Meta are showing momentum, too, especially after Amazon Web Services’ AI revenue was announced to have reached a $15 billion annual run rate that has reinvigorated investor confidence in monetization. On the flipside, many more narrowly focused software stocks remain under pressure with a cloudy outlook as investors grapple with how agentic AI will impact the business models of companies like Salesforce, Adobe, ServiceNow and Oracle.
Notably Netflix reported strong earnings and revenue but gave some lower guidance and delivered the news that founder Reed Hastings plans to step down from the board in June. Recall that the company failed in its attempt to buy Warner Bros. Discovery when it was outbid by Paramount Skydance earlier this year. They received a $2.8 billion breakup, which was a nice consolation prize and boost to the bottom line, but investors showed they are solely focused on subscribership and ad revenue, and have some reasonable worries that without Hasting’s vision, the future may be uncertain.
Turning to economic news, data was light this week. Producer prices rose 4.0% in March, the largest increase since February 2023, but this was deemed “old news” by the market, as it reflected the war-induced energy price surge that may now be in retreat. Home sales were weak in March, down 3.6% to an annualized rate of 3.98 million, thanks to rising mortgage rates and price and inventory dynamics that continue to stymie the sector. Finally, weekly jobless claims were lower than expected, in a bit of a head-scratcher as headlines continue to reflect AI-related layoffs from the likes of Oracle, Morgan Stanley and Block Inc.
In a CNBC interview, Cleveland Federal Reserve President Beth Hammack said she thinks rates are “in a good place”, that the Fed will be on hold for “a good while” and has concerns on both sides of the Fed’s mandate of stable prices and maximum employment. This was in the same vein as recent comments from other Fed policymakers.
Staying on the Fed front, the Senate Banking Committee will hold a confirmation hearing next Tuesday for Kevin Warsh, President Trump’s nominee to succeed Fed Chairman Jerome Powell. And President Trump threatened to fire Powell if he stays on at the Fed beyond his term as chair, which ends May 15 (two years remain on Powell’s term as a Fed governor).
As we head into the weekend, we can all breathe a little easier thanks to the melt up in stock prices that has restored and enhanced our financial picture back to where we began in 2026 and then some. But I would be remiss not to warn you that leaving your sandwich in the toaster oven too long risks burning that melt, and that too many melts can lead to indigestion. So, with that tortured metaphor now fully exhausted, I remind you, as ever, to work with your RWA team to review your allocations and your financial plan. The fast shift in market conditions brings the opportunity to replenish liquidity, to rebalance or take some losses to offset gains, and maybe to add to positions hurting or still only in nascent upswings from March’s carnage—all with the goal of positioning yourself well for the months ahead. Stay hungry!
Written by a human.