Let's get to the big story.
Breakdown while US equity markets seeing wild swings to kick off the trading week uncertainty over the conflict in the Middle East and the major stock averages, with the Dow tumbling over 1200 points on Tuesday, only to pair losses by the end of trading.
Meanwhile, crude oil prices dipped late Tuesday, and this did come on the heels of several developments, including Trump pledging US Navy escorts and insurance for commercial tankers moving through the Strait of Hormuz.
While markets do still.
Remain jittery over the prospect of a drawn out conflict.
Well joining me to weigh in on this Wednesday morning is Eric Criscuolo, Market Strategist at the New York Stock Exchange.
Eric, good morning.
Thank you so much for joining me.
Good morning, Remy, always a pleasure.
Well, we are looking at Dow and S&P 500 futures up by at least 25 of a percentage point, and oil is pausing at least for now.
So what do you make of the action we have seen across equities across oil markets.
It's been a wild ride, but you know, not terribly surprising given what happened and what caused the triggers or what the triggers were, you know, oil ripping higher on the conflict that's typical in anything you know with the conflict playbook, war in the Middle East, so that was expected, you know, equities selling off but also, you know, not selling off a lot, you know, buyers stepping in at those key averages we've been. for a while, the 100 day moving average, some of the some of the longer trend lows of the S&P found support there and then we're able to bounce back off those levels to at least finish off the lows of the prior two days.
And then you know the interesting thing has been the move in treasuries.
Treasuries have sold off, yields have spiked.
Part of that could be because of the oil rise and the inflationary pressures that that could trigger.
There's also, you know, possibly some demand for dollars.
We saw the dollar spike as well against basically all the major crosses, so against the yen, against the Swiss franc, against the euro, the dollar spiked as well.
Again, typical of a conflict playbook where you would see the dollar rising as a kind of a flight to the dollar, but you know, potentially treasury is being sold to raise cash possible, but also some of the inflationary pressure as well.
You just mentioned inflation, and this is something that all of us are watching in particular the central banks.
So the Fed will be continuing to monitor inflation pressures as well as economic data on the labor market.
We just got the ADP report and the jobs report is coming out on Friday.
So what do you make of the labor market and inflation concerns?
Yes, so you know obviously oil throws a wrench into things, although the Fed, I don't want to speak for the Fed, but you know they will.
Probably look through the oil price at least temporarily because it it will probably pull back if and when this conflict kind of recedes a little bit so it likely won't stay elevated for that long, but time will tell. so they can look through the oil price spike.
PPI last week was a little high.
That caused a little bit of concern.
You are seeing the markets kind of reprice a little bit on What the Fed will do.
We're still thinking of a July cut as the first time they cut, but that's kind of the odds have come down a little bit, and the two cuts that we were expecting a couple of weeks ago for the full year kind of pulling back a little bit.
So still kind of two cuts price in, but just a little less.
So the Fed is looking at those price increases, they'll probably look through.
The labor market kind of continues as is.
It's low hire, low fire.
The ADP print today was good as far as the labor market goes.
So not a lot of things on those areas are probably going to change much.
I think Moran is talking right now.
He's obviously an uber dove.
He wants to cut a lot, so we'll see, but it looks like there's still going to be a lot of A lot of differing opinions on the Fed committee and then of course we're going to have a new Fed chair rolling in relatively soon, probably so that's going to throw another another monkey wrench into everything we're seeing.
So basically TBD.
Yes, absolutely.
And one thing we can't forget is that given all of the headlines from over the weekend as the Middle East conflict began, we can't forget about the performance of the major.
US stock averages so far in 2026.
So concerns about AI disruption, how that is going to affect the labor market as well as other industries and cracks in private credit.
So where do we stand on those two topics?
Yes, so you know software has been weak for a while and then obviously the past week or two it's been that weakness accelerated on a couple of well-read blog posts and you know there's definitely.
It's definitely triggered a second guessing as far as what the terminal value of these companies are.
You know, so many of the software names have been hot for a long time, ridden to astronomical levels as far as market caps and valuation, and so there was kind of a rethinking of, well, what exactly will these companies look like in 25, 10 years out, especially how will they be growing?
Will growth be accelerating, decelerating?
The cloudiness that kind of crept in is just a natural cause or a trigger for evaluations to kind of pull back a little bit, and we saw some of the beaten down software names kind of rally a little bit for the past several days.
Part of that is probably short covering, right?
A lot of shorts kind of piled onto those names, wrote those names down with this conflict.
Everyone wants to kind of step back away from the markets overall.
You would cover your shorts to kind of get market neutral, and that would just trigger an increase in stock prices.
But again, there's probably also like a stepping back.
OK, what's happening?
The numbers have been relatively well for most of the software names.
Some of them have printed weaker results than expected.
But by and large things are still kind of going well and it looks like a lot of the software names are saying, hey, listen, AI is actually going to really help us going forward in how we roll products out and how people engage with our products.
So I think it's still, that still has to be worked out but you know the initial the initial sell trigger right just get out.
That's maybe pass us a little bit and now there's a reevaluation of the evaluation that just took place as far as what are these names, how can these names grow in the future and I think that's kind of causing all the investors to kind of just circle back on their thesis and make sure it's solid.
Eric, we will have to leave it there for today, but thank you so much for joining us and as always thank you so much for weighing in on a broad range of topics always a pleasure thank you.
