Markets started strong but faded on the back of oil. Should the storm continue or is there light ahead?
Monday
S&P 500 1.01% | NASDAQ 1.22%
Both bond and stock markets did well on Monday. This came as oil prices retreated from recent highs. That retreat is viewed as favorable for potential future inflation. That indication was taken to mean better growth prospects (for stocks) and lower long-term rates (for bonds).
Tuesday
S&P 500 0.25% | NASDAQ 0.47%
Market optimism stayed in play for Tuesday. This was surprising as the oil markets rebounded, bringing oil back above $100/barrel. Investors may be looking past that and already trading the Federal Reserve Board (FRB) announcement on Wednesday.
Wednesday
S&P 500 1.36% | NASDAQ 1.46%
Happy Fed meeting day! The FRB met and delivered information, with no rate cuts. To be fair, no rate cuts were expected. The information gave a clearer picture into how recent supply disruptions of oil are viewed by the FRB. They are in a wait and see mode much like the rest of us. They updated their year-end forecast for core inflation to 2.7% from 2.5%. Surprisingly. They also increased their growth expectations from 2.3% to 2.4% for 2026. The hawkish inflation reading was enough to send oil and bond yields higher, while sending stocks lower.
Thursday
S&P 500 0.27% | NASDAQ 0.28%
Oil surged on Thursday as Iran increased localized attacks on energy infrastructure. Their actions may give the US some more incentivized allies in the region. The spike in oil caused a similar response to Wednesday from markets, however, far more muted. Jobs data signaled strength as weekly job losses fell to 205K.
Friday
S&P 500 1.51% | NASDAQ 2.01%
Selling intensified on Friday, bringing the S&P500 to close 7.00% from its recent high about three weeks ago. The move in markets came from continued pressure on oil prices. Also, what’s called triple witching, an event on the options market that increases selling pressure on the day. Additionally, I would say it was a weekend risk off trade. An unwillingness of investors to carry positions across the weekend as the news cycle has been pretty thick. The unwillingness comes from two untraded days of information.
Conclusion
S&P 500 1.90% | NASDAQ 2.07%
What started off as a nice rebound from the last several weeks, ended much the same as prior weeks. The moves on the market are all about oil. They will likely be so until there is more clarity (one way or another) regarding the Strait of Hormuz. If it remains closed, a short-term market shock is likely followed by normalization. While a reopening would lead to a market rally as supply disruption is slowly being priced in at this point.
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