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Briefing.com Summary:
*President Trump called Iran's response to the peace proposal "totally unacceptable."
*Oil prices are up, with supply concerns still simmering.
*President Trump and Xi Jinping will meet in Beijing May 14-15.
Stop us if any of this sounds familiar.
There was a peace proposal put forth last week that could end the Iran war. Oil prices plummeted on the news, stocks rose to record highs, and everything was hunky-dory in conjunction with a massive AI-induced rally in the mega-cap stocks and semiconductor stocks.
Over the weekend, President Trump deemed Iran's response to the peace proposal as "totally unacceptable." Oil prices have risen on this news, stock prices are backing up a tiny bit, and everything as it relates to AI still seems hunky-dory.
Currently, the S&P 500 futures are down 11 points and are trading 0.2% below fair value, the Nasdaq 100 futures are down 41 points and are trading 0.2% below fair value, and the Dow Jones Industrial Average futures are down 81 points and are trading 0.2% below fair value.
Recall that WTI crude dropped more than $10.00 when the aforementioned peace proposal hit the wires. They are up $2.77 today, or 2.9%, to $98.18/bbl, even though President Trump said last week at the time of the proposal that the bombing would start again big time if Iran didn't agree to what it had already agreed to.
There is a dose of concern, then, that the Iran situation could take a turn for the worse, but frankly there isn't any real fear that it will. A 2.9% increase in oil prices on the other side of a "totally unacceptable" response from Iran is a token response.
Traders are cognizant that President Trump will be in China May 14-15 to meet with Xi Jinping, and they are betting that it is unlikely he will make the oil supply situation worse for China ahead of that summit by ordering a debilitating bombing of Iran's infrastructure. They are also betting that he won't want to make the gas price situation worse for U.S. consumers.
They could be wrong, but the price action isn't there to support any other conclusion. What it supports is a knowingness that the Iran war and blockade of the Strait of Hormuz are still a thing.
In the same vein, a six-week win streak for the S&P 500 and Nasdaq Composite (and seven weeks for the Russell 2000) suggests the stock market sees things in a positive light, with the strong earnings growth and AI momentum blinding out the geopolitical mess.
And, so, we come in to Monday with a slight downward bias. Reports will suggest it is because of the jump in oil prices and the ongoing war. That fits neatly with the leaning of the equity futures market, but in reality the leaning of the equity futures market has more to do with some general profit-taking activity after a big run by the stock market.
Since the end of March, the Nasdaq is up 21.6%, the Russell 2000 is up 14.6%, the S&P 500 is up 13.3%, the S&P MidCap 400 is up 9.6%, and the Dow Jones Industrial Average is up 7.1%.
