Market Notebook

PRICE ACTION:
Equity prices, as measured by the ticker SPY, closed higher while bond prices, as measured by the ticker BND, closed lower over the last week.

SPY     +0.54%
BND     -0.27%

TECHNICAL ANALYSIS:
Markets moved higher for a fourth consecutive week, with the S&P 500 and Nasdaq both closing at fresh all-time highs for the second week in a row. The pace of the rally slowed, however, and the gains were uneven beneath the surface.  The NYSE Semiconductor index was the standout performer, entering the weekend on an 18-session win streak and up more than 10% for the week and 50% year-to-date. 

Treasury yields moved higher during the week as crude oil prices climbed,  creating headwinds for BND. The 2-year Treasury yield gave back nearly half of a three-week decline that had built on ceasefire optimism and falling oil prices.  Renewed yield pressure is a reminder that the bond market remains sensitive to any geopolitical developments that could reignite the energy-inflation narrative.

SENTIMENT:
The rally remains intact, and the early earnings results are encouraging. However, the pause in momentum suggests the market may need a clearer geopolitical signal \[LongDash] such as a definitive resolution or positive diplomatic development \[LongDash] before pressing meaningfully higher. Volatility edged higher, and high-yield credit spreads were flat after three consecutive weeks of tightening.  Consumer sentiment held at record-low levels in April, with the University of Michigan’s survey gauge at 49.8 \[LongDash] a 6.6% decline from a month ago and the lowest reading on record. Consumers now see prices rising 4.7% a year from now. 

ECONOMY AND FUNDAMENTALS:
The week’s central storyline was the peculiar state of the ceasefire \[LongDash] what one observer aptly described as a “Schrödinger’s ceasefire,” where hostilities appeared to be simultaneously ongoing and paused. Iran seized ships in the Strait of Hormuz, challenging the ceasefire, and Iran’s parliament speaker said that reopening the Strait is “impossible” as long as the U.S. blockade remains in place.  Trump extended the ceasefire indefinitely, saying it would continue until Iran’s leaders submit a “unified proposal” to end the war, after reports that a second round of peace talks in Pakistan had been put on hold.  Oil prices rebounded on the maritime tensions before easing late in the week.

The Federal Reserve’s leadership transition was the other dominant theme. Kevin Warsh’s Senate Banking Committee confirmation hearing wrapped up Tuesday, with Warsh stating that Trump has never asked him to predetermine any interest rate decision, and pledging that the Fed must remain largely independent of political influence. “The Fed must stay in its lane,” he said.  On Friday, the Justice Department abandoned a criminal investigation into Fed Chair Jerome Powell, paving the way for the Senate to vote on Warsh’s confirmation.  Powell’s term as chair ends May 15, and the transition is now the primary institutional focus for monetary policy markets heading into next month.

First-quarter earnings season continued to deliver encouraging results. A little over a quarter of S&P 500 companies have now reported, with over 80% beating both EPS and revenue estimates.  Boeing reported a much smaller-than-expected loss for the first quarter, with revenue of $22.2 billion beating estimates and operating cash flow vastly improved from the prior year.  Tesla reported a mixed quarter \[LongDash] adjusted earnings per share of $0.41 beat expectations, but revenue of $22.39 billion came in slightly below consensus, and shares gave back initial after-hours gains after the company announced capital expenditures this year would run $5 billion above prior guidance.  Elsewhere, retail sales were solid on a year-over-year basis, up 4.0%, with strong monthly momentum led by gasoline stations \[LongDash] a reflection of the elevated energy environment rather than organic consumer strength.  Initial jobless claims remained low at 214,000, keeping the labor market picture intact. Markets have set a high bar for 2026 earnings, and at elevated valuations, returns may not be as forgiving if results begin to disappoint. 

All the best during the week ahead!

Disclaimer: Nothing in this discussion should be considered investment advice. The content of this discussion is strictly my personal opinion and subject to change at a moment’s notice. Investment advice can only be provided to you by your investment professional and not by a general market discussion such as this one. If you wish to speak with an investment advisor, contact us. We can probably help.