How Did the S&P 500 Rally Last Week Despite Higher Oil and Yields?
What’s in Today’s Report:
- How Did the S&P 500 Rally Last Week Despite Higher Oil and Yields? (Hint: AI).
- Weekly Market Preview: Geopolitics Still Dominate, Will Oil and Yields Sustainably Decline?
- Weekly Economic Cheat Sheet: A Busy and Important Week (Jobs Report Friday the Highlight)
Futures are moderately weaker as there was no diplomatic progress over the weekend between the U.S. and Iran and oil and Treasury yields are higher in response.
President Trump rejected an Iranian proposal to return to the June ceasefire agreement and re-open the Strait of Hormuz, although there is some hope that negotiations between the two sides will continue this week.
Oil was up 4% overnight while the 10 year Treasury yield rose four basis points and those factors are pressuring futures.
Focus will remain on geopolitics and, as was the case last week, any hint of diplomatic progress should help Treasury yields and oil fall and stocks recover from these early losses (while a continued rise in yields and oil will further pressure markets).
Turning to actual data/events, there are no economic reports today but there are several Fed speakers including Bowman (8:15 a.m. ET), Cook (1:25 p.m. ET) and Barkin (1:30 p.m. ET). If they reinforce last week’s hawkish tone from Fed speakers, look for that to put incremental upward pressure on the 10 year yield.
