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Briefing.com Summary:
*Markets are rallying on the report of the U.S. sending a 15-point peace proposal to Iran.
*The Islamic Republic of Iran has reportedly dismissed the peace proposal.
*Import and export prices both surged in February—before the start of the war.
One thing appears to be certain this morning. There is a peace proposal out there to end the war with Iran, and it is said to have 15 points of negotiation. Markets seemed to like that idea overnight.
Foreign equity markets rallied; oil prices dropped; the dollar weakened; and Treasury yields sank. It was a rehash of the activity seen early Monday morning, but with less gusto.
The big question is this: is Iran ready to accept the terms of the peace proposal offered by the U.S.? The answer is that it doesn't appear to be. The Hill, citing reporting by the Associated Press, said the Islamic Republic has dismissed the proposal.
That is a disappointing revelation, and it has harnessed an equity futures market that had been running with more enthusiasm earlier.
Currently, the S&P 500 futures are up 47 points and are trading 0.7% above fair value, the Nasdaq 100 futures are up 219 points and are trading 0.9% above fair value, and the Dow Jones Industrial Average futures are up 348 points and are trading 0.7% above fair value.
These indications have the stock market on track for a higher start, but given Iran's reported denial of the peace proposal, there is a measure of doubt about the sustainability of the move. There might also be a measure of confusion, as market participants try to determine who is actually calling the shots for Iran and who is engaging with authority in the reported negotiations with the U.S.
That confusion, nonetheless, is overlaid with the hope that this peace proposal is another breadcrumb leading the U.S. to an off-ramp in its war with Iran, which has also said it is okay for "non-hostile" ships to travel through the Strait of Hormuz.
Oil prices have slipped. WTI crude futures are down 4.1% to $88.64/bbl, and Brent crude futures are down 4.3% to $95.97/bbl. That is a step in the right price direction, but it isn't enough yet to calm market participants.
In the same vein, the latest import and export price index for February is unlikely to be enough to calm the Fed. Import prices were up 1.3% month-over-month in February (prior 0.6%), and nonfuel import prices were up 1.1% (prior 0.8%). Export prices jumped 1.5% month-over-month (prior: 0.6%), and non-agricultural export prices surged 1.7% (prior: 0.7%).
The key takeaway from the report is that import and export prices were up sharply before the start of the war with Iran, which will lead to concerns about inflation rates accelerating in March to account for the spike in energy costs.
The 2-yr note yield is down five basis points to 3.88%, and the 10-yr note yield is down six basis points to 4.33%. That, too, is a step in the right direction, but it is a light step knowing there is still high potential for a headline to come down hard at any time.
