Things you need to know
- No deal in Islamabad. 21 hours. Nothing.
- Trump announces a US Navy BLOCKADE of the Strait of Hormuz.
- Oil surges 8% back above $104. But the global market reaction? Not panic. And THAT tells you something.
- Earnings season kicks off TODAY — the big banks are up. Yet it is GS that reports first.
- CPI came in as expected, HOT but not HOTTER.
- Try the Chicken Soup.
**I am in NYC until Wednesday. I will on Schwab TV at 9 am today, Mornings with Maria (Fox Business) tomorrow from 6-9 am and then on Wednesday, I will join the Big Money Show (Fox Business) from 12-1 pm**
Good morning. Well…..so much for the optimism. There is a lot to hit this morning, so let’s go!
I told you Friday — watch what comes out of Islamabad because THAT was your next market mover. And here we are. JD Vance, Stevey Witkoff and Jared Kushner sat across from the Iranians for 21 hours in what was the highest-level face-to-face engagement between the US and Iran since the 1979 Revolution. The Iranians sent their Parliament Speaker and Foreign Minister. Pakistan’s Prime Minister was in the room. And after all of that…..nothing. No deal. No agreement. Vance walked out, boarded Air Force Two and said —
“The bad news is that we have not reached an agreement. And I think that’s bad news for Iran much more than its bad news for the United States of America. They chose not to accept our terms.”
Trump summed it up on Truth Social — “Most points were agreed to, but the only point that really mattered, NUCLEAR, was not.”
And then — Trump announced a US Navy BLOCKADE of the Strait of Hormuz. Effective at 10 am est today and that sent tremors thru the markets last night sending futures significantly lower. But here is the interesting thing – this morning the global market reaction is NOT panic. And THAT tells you something important.
Yes — oil surged 8% back above $104. European gas futures spiked 18%. Those moves are real and they matter. But equities? Asia sold off — modestly. Japan down 0.72%, Hong Kong down 0.71%, China’s CSI 300 essentially flat. South Korea’s Kospi actually turned POSITIVE.
European markets are lower as well – but are not on fire.
US futures tumbled overnight — Dow was down more than 500 points — but have already pared those losses significantly. S&P futures are now down about half a percent. That is not a market in panic. That is a market digesting a headline.
Why the relatively calm reaction? Because investors, traders and even some of the algo’s are viewing this as just another negotiation tactic versus a long-term policy change. We have seen this before, in fact what markets are realizing now is that the blockade is not a total blockade – it is aimed squarely at Iran – the other gulf states have the freedom to pass their tankers thru the strait. And once you understand this the measured reaction makes complete sense.
Now — Let’s Be Precise About This “Blockade” Because the MSM was getting it wrong.
The blockade is a blockade of IRANIAN PORTS specifically. CENTCOM was crystal clear —
“Centcom forces will not impede freedom of navigation for vessels transiting the Strait of Hormuz to and from non-Iranian ports.”
So, what does that mean? Saudi oil can still move. Qatari LNG can still flow. Kuwaiti tankers, UAE exports — all free passage. What IS choked off — completely — is Iran’s ability to export its oil and import goods. The US Navy is laying a naval siege on the Iranian economy. Cut off their revenues. Cut off their imports. Starve the regime financially. Force them back to the table — this time without the nuclear card.
And simultaneously — WE are clearing the mines in the Strait. CENTCOM says they will publish a “safe pathway” through the Strait for commercial mariners once clearing is complete.
The real strategy is more simple – Open the Strait for the world. Shut it for Iran. Sweep the mines. Restore global energy flows. Strangle the regime economically. And sell American oil to everyone who needs it in the meantime.
Is it risky? Absolutely. The IRGC said any military vessel approaching the Strait “will be dealt with harshly and decisively.” But if it works, Trump walks away having reopened global shipping, crippled Iran’s economy and positioned the US as the world’s indispensable energy supplier. That is not nothing…..
The question is — does Iran have the nerve to fire just ONE missile or drone? We are about to find out. And here is the thing that SHOULD give you at least a small measure of comfort this morning — as of right now, Iran has NOT attacked a single ship overnight since the blockade was announced. The IRGC is issuing threats but has not attacked anyone.
Now — Let’s Do the Math
The US IS the world’s largest oil and gas producer. Petroleum exports hit a new record of 7.9 million barrels/day the week of March 27th. Trade flows are already shifting. But here is the cold hard truth — the US does NOT have enough oil to replace the 20 million barrels per day that normally flow through the Strait. Not even close.
But here is the number nobody is talking about — how much of those 20 million barrels is actually IRANIAN oil? About 1.5 to 1.8 million barrels per day…..less than 10% of total Strait flows. The other 90-plus percent? Saudi Arabia — 5.5 million barrels per day. Iraq — 3.3 million. Kuwait, UAE and Qatar — another 6 to 7 million combined. None of that is being touched.
Trump is not blocking the world’s oil. He is blocking IRAN’S oil. And that distinction matters enormously — both for markets and for the negotiating table. Because every day Iran cannot export oil is another day their economy bleeds out. And a bleeding economy has a way of changing negotiating positions…..
OK – back to the US….. What’s up with inflation?
Friday gave us March CPI and while it matters, it was NOT unexpected. Headline came in at +0.9% for the month and +3.3% year over year. Energy drove it — up 10.9% for the month, gasoline up 21.2%.
But here is the silver lining — core CPI – Ex food and energy – came in at just +0.2% monthly and +2.6% year over year, BELOW estimates on both counts. Goldman said it simply — ‘the Fed can look through the energy-driven noise so long as these factors hold’. The market agreed and there was barely a reaction at 8:30 Friday morning.
But with oil now back above $104 and Iranian barrels getting cut from the market — April and May CPI prints are going to be something else entirely.
As you would expect – WTI surged 8% taking it back above $104/barrel. Brent jumped to $102. Wholesale gasoline spiked 6%. Jet fuel up 10%. Analysts, traders and academics are all chiming in…..saying that it could be a long time before oil prices go down – with many of them pointing to the fact that gasoline prices are up 38% since February 28th and likely going higher still.
Bonds — the 10-yr closed Friday at 4.317%, up 2.4 bps and this morning yields are up 1.7 bps at 4.33%. The 30-year closed Friday yielding 4.91% and this morning they are yielding 4.93% up 2 bps…. Recall – 4.5% on the 10 yr and 5% on the 30 yr are the lines in the sand…if we get close that will cause a bit more unrest for stocks.
Gold closed at $4,750 on Friday — down $35 as traders trimmed positions before the weekend. This morning – gold is down another $30 trading at $4,715 – because the idea that energy will remain elevated longer than expected also raises the possibility that global central banks might be forced to raise rates rather than hold them steady and higher rates are a headwind for gold.
The VIX closed at 19.23 on Friday but is surging higher this morning (and that makes sense), the VIX is up 10.5% – now trading at $21.25 putting us back in the ‘cautious zone’ – but leaving us well below the ‘panic zone’. Trendline resistance is at $22.53 – and if that is breached – then expect the tone to get more anxious. I would not expect that to happen unless of course Iran starts attacking the US Navy fleet blocking Iranian ports. But even if that happens – expect the US response to be swift and painful.
US Futures got hit hard initially last night but have since recovered a bit. At 6 am Dow futures are down 255 pts, S&P’s down 42 pts, Nasdaq futures down 160 pts, while the Russell is down 31 pts. Not ideal for sure, but not the initial disaster it was looking like on Sunday.
We will get Existing Home Sales data this morning and they are expected to be down by 0.8% – but my gut says – the market will NOT focus on it today. Tomorrow brings us the March PPI report, and it too is expected to be up substantially – top line +1.1% m/m and 4.6% y/y. Core PPI is expected to be up 0.4% m/m and +3.8% y/y both readings higher than last month. I think the market will focus on that.
And it’s Earnings Season.
Look — I know the geopolitical headlines are dominating everything right now. But earnings season kicks off THIS WEEK, and the big banks are up first. What the C-suite says on their calls will tell us everything about the health of the US economy heading into what is shaping up to be a very turbulent Q2.
Here is the schedule —
Today — Goldman Sachs (GS). Interesting move — Davey jumped out in front of Jamie…. The street is expecting revenues of $16.9 billion, up 12% year over year, and EPS of $16.35, up 16%. Trading revenues should be strong — mid-quarter updates pointed to +10% to +15% growth. Solomon said in March he expects M&A to accelerate in 2026 despite the conflict. Let’s see if he still feels that way after this weekend…..
Tuesday — JPMorgan Chase (JPM), Citigroup (C) and Wells Fargo (WFC). This is the BIG day.
Jamie is expected to earn $5.41 per share on revenues of $48.2 billion — up 6.7% and 6.4% year over year. Remember — he already warned in his shareholder letter that this war risks oil and commodity price shocks that could keep inflation sticky and rates higher than the market expects. He sees the stagflation risk. He will NOT sugarcoat it. Watch his language on loan loss reserves — if Jamie starts building them aggressively, that tells you everything you need to know about what he really thinks is coming…..
Citigroup is the interesting one — Jane Fraser’s turnaround story. Expecting EPS growth of a whopping 34% year over year on revenues of $23.6 billion, up 9%. The investment banking division has been on a tear — an 84% surge in M&A advisory revenues in late 2025 expected to have continued into Q1.
Wells Fargo — EPS growth of over 23% year over year, revenues of $21.79 billion up 8%. Wells still operates under the Fed’s asset cap — watch for any commentary on when that gets lifted. That is the single biggest catalyst for this stock…..and it still has not happened.
Wednesday — Bank of America (BAC) and Morgan Stanley (MS) round out the week. BAC expects roughly 10% earnings growth. Morgan Stanley — which has beaten expectations every single quarter since early 2023 — looking at revenues of $19.7 billion up 11% and EPS of $3.01 up 16%.
Now here is the thing that matters most about ALL of these calls — it is NOT the Q1 numbers. What the market wants to hear is GUIDANCE. What are these CEOs saying about Q2? How much money are they putting into reserves – because this IS important. What about M&A? What about energy sector loan exposure? With oil at $104, a blockade of the Strait and a ceasefire expiring in ten days — I want to hear what Jamie Dimon thinks is coming. Because Jamie doesn’t miss much…..and remember – the sector is down 7.5% ytd….just sayin’!
The S&P closed at 6,816 down 8 pts….short term trendline support is down at 6,761 – a level I believe we are about to test…but look – no one really expected the weekend talks to produce a resolution…so none of this should be a surprise…..If we fail to hold at 6,761 then I would expect us to test the long term trendline at 6,660.
In the end – we need to get this resolved quickly- otherwise we will have to recognize that the Dems could sweep in November and that will only cause more angst in the markets and don’t think that Iran doesn’t realize that. A democratic sweep will immediately launch impeachment proceedings and if they control both houses we can be sure that is what they will do – but they still need 2/3rds of all senators to vote YES to impeach, something that likely would not happen.
Look – The ceasefire expires in ten days. The US Navy is in the Strait. Iran is not backing down on nuclear. Oil is back above $104. And the big banks are about to tell us what they think the second half of 2026 looks like. There is a lot to focus on – Strap in…..it is going to be an interesting week.
Call me at 561-931-0190 and let’s talk about how SlateStone Wealth can help you navigate all of this and reach your goals.
Take good care,
Kp
[email protected]
Source: Bloomberg, CNBC, Reuters, Wall Street Journal
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Chicken Soup
This is always my go to when I feel unsettled.
I made this yesterday – I used thighs on the bone, skin on, onion, carrots, celery (all chopped), s&p, chicken bouillon and a full pot of water.
Add it all to the pot and bring to a boil – then turn heat down to med and let it cook for 2 hrs.…. You will have to add some water halfway through.
After two hours – turn heat off, remove the chicken and the skin and let cool.
As the soup cools the fat will rise to the top – skim it off, toss the skin, shred the chicken, and add back to the pot.
Serve with white rice or ditalini pasta – make sure you have plenty of fresh grated parmegiana on the table for your guests.
Buon Appetito