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Briefing.com Summary:
*A two-week ceasefire agreement between the U.S. and Iran has triggered a worldwide rally in equity markets.
*WTI crude futures are down 17.9% as traders anticipate some relief in shipping supplies through the Strait of Hormuz.
*Delta said it has not seen any reduced summer demand despite higher ticket and fuel prices.
Brace yourself for a big day today. We mean that in a good way. Thankfully, a whole civilization did not die last night, as the U.S. and Iran agreed to a two-week ceasefire that Vice President Vance is calling a "fragile truce."
The equity futures market and the oil market, however, are seeing it as something more. The former is soaring and the latter is collapsing in a relief trade that is linked in large part to President Trump's assertion that this ceasefire would not have happened if Iran had not agreed to the "complete, immediate, and safe opening of the Strait of Hormuz."
Currently, the S&P 500 futures are up 174 points and are trading 2.6% above fair value, the Nasdaq 100 futures are up 835 points and are trading 3.4% above fair value, and the Dow Jones Industrial Average futures are up 1,233 points and are trading 2.7% above fair value. WTI crude futures are down 17.9% to $92.77/bbl.
The relief trade has also made its way to the Treasury market. The 2-yr note yield is down nine basis points to 3.74%, and the 10-yr note yield is down 10 basis points to 4.24%.
The only contingent not feeling relief at the moment are short sellers of equities and leveraged long buyers of oil. Otherwise, it is all systems go on buy orders that will take the S&P 500 back above its 200-day moving average when trading begins.
But will it last? That question isn't directed at today's action. It is directed at the ceasefire agreement. That is the big question. Two weeks is a long time in this volatile situation where it is unclear who is calling the military shots for Iran.
For their part, though, the stock market and the oil market seem inclined to take it day-by-day, and today is a good day.
The goodness has been aided by Delta Air Lines (DAL) affirming that it has not seen any reduction in summer demand due to higher ticket and fuel prices. That affirmation has shed light on the fact that the U.S. economy, with a low 4.3% unemployment rate, continues to exhibit resilience rooted in consumer demand.
Granted, that demand has been, and will be, tested by the spike in energy costs, but so far there haven't been any acute signs of demand destruction, except perhaps in the spring housing market, which has been hurt by rising mortgage rates.
The release of the FOMC Minutes for the March 17-18 meeting at 2:00 p.m. ET will shed some light on the discussion had at that meeting about the economy, but Fed Chair Powell did a good job at his post-meeting press conference laying out the reasons why the FOMC voted to keep the fed funds rate unchanged and why it is likely to hold rates steady for an extended period.
In other words, we're not looking for any market-moving material in these minutes. The market has all it needs right now in the short-term ceasefire agreement.
