Stocks Rallying on Ceasefire News
Stocks Ending Week Higher
US stocks are ending the week firmly higher with the market buoyed by news of the 60-day ceasefire extension between the US and Iran and the weaker-than-forecast core PCE data we saw yesterday. Earlier in the week we seen volatility across risk markets in response to news of series of tit-for-tat attacks between the US and Iran, raising fears that the ceasefire was at risk of collapsing. However, reports overnight suggest that the two sides are back in the negotiations process and have provisionally agreed a two-month extension to allow for further work towards striking a peace deal. While the reaction to the news hasn’t been full of conviction, lower oil prices and higher stocks suggests that there is a decent level of optimism among traders.
Awaiting Further Details
For now, the market remains in wait and see mode over whether or not the Strait of Hormuz will be reopened during this ceasefire window. If reopened, this should help cool oil prices further, leading USD lower, and allowing stocks room to push higher as risk sentiment rallies. If the Strait remains closed, however, this will keep oil prices underpinned, maintaining inflationary pressures in the US and the view that the Fed will likely hike rates by year end, which could curtail the rally in stocks. Yesterday’s downside surprise in core PCE is an interesting development, however, and if the next CPI reading shows any cooling, this could help drive stocks higher again.
Technical Views
ES (S&P Futures)
The rally in the ES has seen price pushing back above the 7,537.75 level, continuing higher within the bull channel which has framed the rally off the March lows. While above here, focus is on a continuation higher. However, we are seeing bearish divergence in momentum studies which suggests the need for some caution near-term amidst possible reversal risks.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.