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Briefing.com Summary:
*The S&P 500 has recovered all its losses since the start of the Iran war.
*The reactions to an illustrious list of earnings reports have been mixed.
*The March Producer Price Index was much better than feared.
War! What is it good for? Defense stocks, energy stocks, and volatility—these are just some of the beneficiaries of war. The best thing from a war, however, is its end; and as far as the stock market is concerned, the end is in sight.
How do we know? The S&P 500 has reclaimed everything it lost, and then some, since the start of the war at the end of February. The added context here is that the S&P 500 had fallen as much as 9.8% from its all-time high in January, so it has been a nice recovery effort, all while the U.S. and Iran have remained at odds with each other on terms for a long-lasting ceasefire.
There are reports, though, that the U.S. and Iran could resume ceasefire negotiations this week. That has taken some of the edge off oil futures ($95.97, -3.11, -3.1%), along with the IEA's prognostication that demand destruction from the higher prices will likely spread.
In any case, it is a straightforward view for the market right now: lower oil prices are better than higher oil prices. It will sort out the whole demand destruction/weaker growth thing at a later juncture, if ever.
What it is sorting now are better-sounding headlines for the path of the Iran war; mixed reactions to earnings reports from JPMorgan Chase (JPM), Citigroup (C), Wells Fargo (WFC), Blackrock (BLK), Johnson & Johnson (JNJ), and Albertsons (ACI); the mega-cap stocks regaining some leadership swagger; and a much better-than-feared Producer Price Index for March.
The Producer Price Index for final demand increased 0.5% month-over-month in March (Briefing.com consensus: 1.2%) following a downwardly revised 0.5% increase (from 0.7%) in February. The index for final demand, less foods and energy, rose just 0.1% (Briefing.com consensus: 0.4%) following a downwardly revised 0.3% increase (from 0.5%) in February.
These changes left the index for final demand up 4.0% year-over-year, versus 3.4% in February, and the index for final demand, less foods and energy, up 3.8% year-over-year, unchanged from February.
The key takeaway from the report is that the inflation seen at the wholesale level in March was driven largely by energy prices and gasoline prices (+15.7%) in particular. The index for final demand services was unchanged, so the market is giving itself some latitude to look through the energy price shock as something that is temporary.
Now, if only the U.S. and Iran can move from a temporary ceasefire to a permanent one. They are not there yet, but the market clearly senses an opening.
Currently, the S&P 500 futures are up 15 points and are trading 0.2% above fair value, the Nasdaq 100 futures are up 124 points and are trading 0.5% above fair value, and the Dow Jones Industrial Average futures are up 28 points and are trading 0.1% above fair value.
