Things you need to know
- Chaos erupts in the gulf. Iran attacks tankers.
- US maintains blockade, disables and boards Iranian ship.
- VIX up, OIL up, Gold falls and bond yields rise.
- It’s a big earnings week – results from a range of industries.
- Try the Spaghetti and Meatballs.
Let’s start with the Iran ceasefire — because this story controls everything else this week. Oil, bonds, the VIX, risk appetite — it all runs straight through the Strait of Hormuz. And over the weekend? Total chaos. And it’s a moving target — hour by hour.
Overnight, the U.S. took control of an Iranian vessel (the Touska) that attempted to challenge the blockade by blowing a hole thru the engine room – disabling it, boarding it, and taking control.
Now recall — Friday, Iran’s Foreign Minister said the Strait was “completely open” during the Lebanon ceasefire. Oil collapsed more than 10%. Trump called it “a great and brilliant day for the world.” Markets ripped. Everyone exhaled… for about 12 hours.
Saturday morning? Game over. Iran shut it back down. The IRGC warned vessels to stay away or be treated as hostile. Tankers were fired upon. India protested after its ships were hit. And Trump made it clear — the U.S. blockade remains fully in force.
This morning — the situation remains tense. The Strait is effectively closed. Iran says it is “far from a final agreement.” The ceasefire expires Wednesday, April 22nd — and Trump has signaled he is not inclined to extend it. If there’s no deal, expect escalation — not de-escalation. At 5 am — the VIX is up 14%, futures are lower by ~0.75%, and oil is up 7.5% at $90.
This is THE story this morning and the expectation is now ‘escalation not de-escalation’.
Now, we’ve seen this movie three times in two weeks. Iran says it’s open, ships hesitate, a few try to pass, Iran turns them back — and we start the whole circus again. There are more than 200 loaded tankers sitting in the Gulf waiting for clarity. And the CEO of Abu Dhabi National Oil Company said it clearly – the Strait is NOT open. Traffic is being conditioned and restricted. Full stop.
Meanwhile, the U.S. and global shippers are rerouting flows away from the Strait of Hormuz — using longer, less efficient routes through the Indian Ocean. It works, but it adds time, cost, and risk — and that’s what’s now showing up across the system. If this drags on that stops being temporary – and becomes structural cost pressure and here is how it all ties together across the different markets.
Oil is the driver. As tensions rise, oil moves higher — and that feeds directly into inflation expectations. Bonds yields are firming because inflation risk means the Fed stays tighter for longer. (Here we go again with that Higher-for-longer narrative.) The dollar is catching a bid – up 0.2% this morning, kissing trendline resistance at $98.50.
And gold? It should be up on this news (think the safety trade idea) but it’s not, It is down $35 at $4,794/oz. Why? Because this is about inflation and rates. The stronger dollar and higher yields are putting pressure on gold — because investors can get safety AND income in Treasuries, instead of just safety in gold.
So this is what it looks like today. Oil up, Yields up, Dollar up, Gold under pressure. Anyone who went short energy into Friday’s close, thinking the Strait was reopening – will have rough day today. Period. This morning Oil is up 7.5%. or $6.20/barrel. Anyone who went short the market will have a field day today! Futures are down about 0.75%.
And the VIX? Up 12% at $19.55 but it is NOT spiking which is suggesting more concern than panic. The market is still betting on some version of a deal or extension. Remember – $30+ would suggest panic – $19.55 suggests caution – but we know how this can change on a dime.
Now — go back to Friday. It was full-on Risk On. The Russell 2000 hit an all-time high. The Nasdaq posted its longest winning streak since 1992. The S&P extended its record run. That was not fear — that was relief.
At the close — the Dow gained 868 pts or +1.8%, S&P +84 or +1.2%, Nasdaq +365 or +1.5%, Russell +57 or +2.1%, Transports +610 or +2.8%, Equal Weight S&P 100 pts +1.2% while the Mag 7 added 545 pts +1.6%.
Earnings? It was all about the regionals. Truist Financial, KeyCorp, and Regions Financial — clean beats top and bottom. U.S. Bancorp beat on EPS, revenue in line. PNC Financial Services beat EPS, missed revenue. Fifth Third Bancorp missed both — but that’s largely Comerica merger-related noise.
But here’s the inside story — commercial lending is doing the heavy lifting. Corporations are borrowing again, tapping credit lines, and that’s what’s driving net interest income (NII). The consumer? Still in the game – but uneven. Some strength, some cracks- and importantly – the banks are not relying on the consumer to make their numbers.
That matters. Because it tells you how regional bank CFOs are thinking about the road ahead. They’re leaning into corporate demand – which suggests confidence in business activity – while staying more cautious on the consumer side and like the big money center banks – they are NOT increasing the size of those reserve accounts beyond what is required and that suggests that they are also not bracing for a ‘credit event’.
Credit quality? Strong. Provisions coming down, Non Performing Assets improving, charge-offs behaving. That is NOT what a credit crisis looks like. Not yet.
Earnings this week are about to pick up speed and this is where the rubber meets the road. We are going to get a peek at a range of sectors – think oilfield services, defense, healthcare, tech, industrials, aerospace, and energy and every name on this list tells a bigger story.
Monday kicks it off with Halliburton — and don’t underestimate it. Oilfield services is the canary in the coal mine for energy spending. If they sound cautious? That tells you exactly where E&P budgets are going. Pay attention.
Tuesday is a big one — Lockheed Martin, Johnson & Johnson, 3M, and General Electric. That’s defense, healthcare, industrials, aerospace — a full read on the real economy. Lockheed tells you what’s happening in defense spending in the middle of a geopolitical sandstorm. J&J is healthcare, 3M gives you global industrial demand. And GE? That’s aviation and capital equipment — big ticket, long-cycle stuff.
Wednesday brings Boeing – Deliveries, MAX inventory, cash burn — that’s the focus. Any sign of real operational progress matters here.
Thursday is loaded. Tesla, Alphabet, and American Airlines. Tesla is about margins – and Musk. Period. Alphabet gives you the cleanest read on AI monetization and the ad market -which, by the way, is really a read on the consumer. And American Airlines? Fuel will be the wildcard. Oil this week could force them to reset guidance in real time.
Then Friday – it’s Amazon and it’s, all about AWS — if you see any deceleration there, tech is not going to like it. Procter & Gamble -that’s your ultimate consumer check — pricing power, volumes, and whether the consumer is starting to “trade down.” To top it off – we’ll hear from energy heavyweights – Exxon Mobil and Chevron – That’s your real-time scorecard on oil — production, cash flow, and how they’re navigating this volatility out of Hormuz.
And make no mistake — this is where the market gets tested, because these are the companies that have driven the rally… led the AI narrative… and are commanding premium valuations. So the question now is – Can they deliver?
There are no eco reports today. But tomorrow brings us Advance Retail Sales, Pending Home Sales. Wednesday we get Mortgage Apps. Thursday – Chicago Fed Activity, S&P Global Manufacturing PMI – expected to be sitting right on the ‘neutral line’ at 50. And Friday brings us the U of Michigan Sentiment Surveys.
Ok – now back to the issue at hand –
The ceasefire ends on Wednesday and that IS the line in the sand this week. One of three things happens:
1- a deal gets done and the strait opens — oil falls hard, stocks rip, and algo’s go all in.
2- The ceasefire gets quietly extended, markets hold, nothing changes. Or
3- No deal, the bombing resumes, oil spikes back toward $100+, bonds get bid, and Friday’s gains – well, they get ‘blown up too’.
Right now it feels like the markets are pricing in an event somewhere between option one and two. We’re about to find out if that is true. Recall – the second round of ceasefire talks are supposed to be happening tonight in Islamabad – Tehran says ‘not happening’.
Overnight – Asian markets ended higher, this morning European markets are all lower – down more than 1% across the board as the tension heats up.
At 6:30 am US futures are lower…. Dow futures +260, S&P’s -35, Nasdaq -128 and the Russell is -30.
In addition to everything we discussed – don’t forget that tomorrow also brings the Kevy Warsh confirmation hearing that begins at 10 am, and don’t kid yourself, this is important. Investors, traders and algos will be listening very closely for how he frames rates, inflation, and policy — because that sets the tone for everything else.
Watch the 2-year because that is the ‘purest read on FED expectations. If Warsh sounds hawkish, the 2-year will move up and that will put pressure on the markets. If he leans dovish, it should drop and stocks should benefit – but remember – no matter what – it could still be a wild card – due to the ongoing conflict in the middle east. For reference – this morning the 2 yr is yielding 3.72% and that is down from 4.01% just 3 weeks ago.
The S&P closed at 7,126 – up 84 pts – blowing right up and thru that ‘trendline resistance at 7,075 that I identified last week. This morning, it appears as if we are about to test that trendline – which is now considered to be support – short term or not, it is a trendline that needs to be considered. My gut says it will fail and we will test the century mark (7,000). But again – it’s all about the headlines.
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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In times of stress we need some comfort food and when I think of comfort food – I think of Spaghetti and Meatballs. Here is my grandmother’s recipe.
Meat sauce – you need: 4 chicken thighs with the skin, 4 country style pork ribs, onions, garlic, olive oil s&p. 4 cans crushed tomatoes (NOT PUREE) Fresh basil.
Now – slice 3 large white onions, chop 4 gloves of garlic and sauté (med/hi) in a heavy bottom pot. After about 5 mins…add the chicken thighs and brown for about 15 mins….remove the thighs and set aside. (when it cools you can remove the skin if you prefer) Now add the ribs to the pot….brown these for about 15 mins… Remove and set aside. Now add – 4 cans of kitchen ready crushed tomatoes….if you can not find then buy the plum tomatoes and run them thru the food processor – add 1 1/2 cans of water – stir – bring heat up to high until it boils then reduce to simmer….season with s&p, add the fresh chopped basil – like 6 / 8 leaves.
Add back the meat – chicken, pork and meatballs. Add in the oil and bits from the fried meatballs. Let simmer for at least 45 mins – stirring occasionally….at this point it is all done. (But if you turn it off and let cool and refrigerate until the next day – it is always better.)
Now bring a pot of salted water to a rolling boil – add spaghetti and cook for 8/10 mins until aldente. Strain the pasta – reserving a mugful of pasta water . Return pasta to the pot – add back 1/4 cup of water to re moisten….now add 4 ladles of sauce and mix well.
Serve immediately in warmed bowls with plenty of fresh grated Parmigiana cheese. Serve all of the meat on a separate platter in the center of the table.
Buon Appetito