by Michael P. Reinking, CFA

Published on 4/07/26 (a/o 1:45 pm)

Coming out of the long holiday weekend with the cloud of geopolitical uncertainty equities were able to close higher after a choppy day of trading. The S&P 500, Dow, Rusell 2k were all up +0.4%. Investors digested a weekend of Iran headlines, plus a long press conference from President Trump mid-day, which contained no major updates but stressed both the latest upcoming deadline (8pm tonight) and his desire to find a peaceful resolution. It was the lowest volume day of the year a function of light attendance, most global markets being closed and traders largely sitting on their hands with the wide range of potential outcomes looming. Most sectors were higher with Discretionary, Energy and Staples leading. Utilities, Healthcare and Materials lagged. Yields were mixed as 2s and 10ys rose 2bp while 30y fell 2bp. ISM Services missed estimates but was generally solid overall, though Prices increased, though that wasn’t unexpected.

The cloud of uncertainty is clearly weighing on sentiment today. As the countdown clock keeps ticking the situation remains fluid with the two sides continuing to exchange bellicose rhetoric. There are also conflicting reports about the diplomatic efforts and whether those lines of communication remain open or not. Meanwhile there have been strikes on military targets on Kharg Island, bridges and railways. The S&P 500, which remained capped by its 200d ma yesterday, was down >1% at the lows but has traded almost all the way back to unchanged after headlines at 1:30 that the UN Secretary General’s Personal Envoy was en route to Tehran.  The S&P 400 and 600 have been outperforming and are now up ~0.3%. As a note the prices mentioned in the commentary below have changed in light of the most recent headlines, but the tables reflect the most recent pricing.  

It’s another relatively light economic calendar. This morning’s ADP Employment change increased to 26k from 15.25k two weeks ago. This was the biggest increase since the inception of this data set in September of last year. Durable goods orders fell more than expected but the ex-transports reading was better than expected and rose from last month, while the capital goods orders, a proxy of business spending, increased by 0.6% after being flat last month. Also, ahead of the open NY Fed President Williams was on Bloomberg TV. He said he expects energy prices to show up in the headline inflation readings (not surprising), and seep into core inflation throughout the year, but so far there was no big changes in his outlook for core. He added that monetary policy is well-positioned for a wait-and-see approach. After the open the NY Fed released its Survey of Consumer expectations which showed a 0.4% increase in 1yr inflation expectations to 3.4% but the expectations for the 3/5yr horizons remained pretty well anchored at 3.1% and 3%, respectively. The labor market expectations were mixed, spending and income expectations remained largely unchanged though respondents were more pessimistic about their future financial situation.

Treasury yields have been choppy throughout the day with some steepening of the curve. As yields have backed up over the last month the 3yr auction this afternoon was met with strong demand ending a streak of weak auctions. 

Within the S&P 500 8 of 11 sectors are lower. Consumer discretionary and staples are leading to the downside both off 1.5%. Within discretionary travel related stocks are some of the worst performers while homebuilders are also under pressure after Seaport Research downgraded the group. Tesla also continues to be a drag down ~3% hitting its lowest level since September. CarMax is one of the few names trading higher after this morning’s Manheim Used Car index showed a 6.2% increase for wholesale used vehicle prices on a y/y basis.

Tech is also underperforming down nearly 1% with quite a bit of news flow.  Apple is a drag falling nearly 3% following the Nikkei reported of an engineering snag with its foldable phone though sources according to Bloomberg say the September launch is still on track. Alphabet, OpenAI and Anthropic are collaborating to try and stop Chinese competitors from illegally accessing results from their AI models, in an “enemy of my enemy is my friend” situation. Broadcom (+5%) and Alphabet expanded their partnership for development of Alphabet’s next-gen TPUs and supply of networking components. Intel is also trading higher after announcing that it is joining the SpaceX/Tesla Terafab project. Samsung traded higher overnight after reporting very strong Q1 preliminary results overnight as Operating Profit tripled the company’s previous record, set last quarter, and 8x last year’s Q1. The stock did end well off its high, like Micron recently, as a very strong print was expected given the jump in memory chip prices.

Energy and utilities are leading on the upside with modest gains. Healthcare is hovering around unchanged though managed care stocks are higher after CMS released final Medicare Advantage Payment rates that were much improved from January’s preliminary schedule. Comm services are also modestly higher. Paramount Skydance is up sharply after reportedly securing  ~$10B of financing from Gulf sovereign wealth funds to fund the Warner Bros. deal. Other media stocks are also modestly higher tangentially Pershing Square Capital Management announced it submitted a non-binding proposal to acquire Universal Music Group for around $60B.

The June Brent crude contract is up ~1% continuing to trade just below the contract highs however, the May WTI contract is pushing to fresh highs. Phillips 66 was out this morning with a revised Q1 outlook that incorporates a ~$900M mark-to-market loss as well as collateral decline from the sharp commodity price increases though the stock recouped much of the pre-market losses. The metals complex is modestly lower though gold is trading a touch higher. The crypto complex is giving back most of yesterday’s rally. Bitcoin failed to break above its 50d ma again yesterday (~70.5k) and is pulling back ~1.5% reversing much of yesterday’s rally while other alt coins are seeing steeper losses. Senator Bill Hagerty said he expects the CLARITY act to advance through the Senate Banking Committee and tee up a full Senate vote by the end of the month. 

The Nikkei was essentially flat overnight. February Household spending missed estimates. A 30yr JGB auction didn’t have much impact on the overall market as results were inline. In China Hong Kong was closed again for holiday but mainland markets opened and were modestly higher. The leader of Taiwan’s biggest opposition party is visiting China for the first time in 10 years in some interesting non-Iran geopolitical news. European markets gave up overnight gains closing near session lows. German and UK final Services PMI was revised slightly lower from the flash reading while France was revised higher. The European Sentix Index reading fell to its lowest level since April of last year, with both Current and Expectation readings falling sharply. 

What happens over the coming hours will clearly set the tone for tomorrow. Otherwise the calendar remains pretty light. The only thing on the US economic calendar is mortgage apps there is some economic data out of Europe including PPI, retail sales and the Germany factory orders. India has a rate decision and there is a 10yr auction in the afternoon. Wells Fargo has its Software Symposium which will get some extra attention given the AI disruption concerns.

US:

Global: