Let's get to the big story.
Breakdown.
Wall Street is set to open higher this morning on Monday, US equities raised their losses for 2026.
The major averages surging to session highs after Trump revealed Iran is reaching out for peace talks and this even as the US begins a naval blockade of the Strait of Hormuz.
But as geopolitical headlines dominated a crucial earnings season is kicking off now.
Investors are grappling with inflation, a massive rotation out of tax by AIs and also.
Growing concerns over liquidity and private credit.
Well joining me this morning is Michael Reinking, Senior Market Strategist at the New York Stock Exchange.
Michael, good morning.
Thank you so much for joining me.
Morning, Remy.
Thanks for having me back.
Well, we have a trifecta of items to go through this morning, and that is as usual geopolitics as well as economic data and earnings.
So were you surprised by the wholesale inflation figures.
I mean the numbers came in better than kind of the street had expected.
But we are seeing kind of a pick up in inflation, right?
So it's been kind of a pretty muted response similar to the fact that we had a reasonably muted response to the CPI data last week.
Look, the expectation is that it's going to take some time for the increase that we've seen in energy prices to flow through the economy and so markets are kind of reacting.
Taking the numbers in stride and not overreacting.
Really it all comes back to what's happening in the Middle East.
Is the ceasefire going to hold?
If so, are we going to start to see energy prices really start to reverse if we if we start to see oil coming flowing through the strait and do we start to see oil prices reverse and then if the faster this comes to a conclusion, the better off clearly. that continues to be kind of the key point for markets.
Absolutely, Michael.
You and I continue to monitor the headlines as they come through, but this morning we're paying attention to the latest earnings coming out from some of the big banks that we heard from Goldman Sachs yesterday.
So what are the key takeaways so far?
Yes, look, you know, coming into earnings season, right, you're looking for kind of S&P 500 earnings to be about 12-13% on a year to year basis.
This is expected to be the sixth consecutive quarter of double-digit earnings growth.
You can have a pretty positive setup.
We've seen.
Despite what's happening geopolitically, we've seen earnings estimates continue to move higher right throughout that process.
So at the start of the year for 2026, analysts are looking for earnings to be up about 13% on a year to year basis.
That's moved up to about 18%, right?
So the way Think about this current quarter is that given what's going on geopolitically, I think markets understand that we were in a good setup at the start of the quarter and then we had this kind of disruption kind of coming in March.
So what they're looking for is to hear that things were going well, but But they want to weed out the idea that there are these big red flags or that there's been any significant change as we started to see the disruption from Iran.
Thus far the bank earnings have been pretty solid, right?
If you listen to the commentary from the management teams, they suggest that we've been in a resilient economic backdrop, the consumer continues to hold up, business spending is solid.
Yesterday there was some disappointment with the FIC trading, the fixed income and commodities trading at Goldman Sachs.
Though equity trading was very solid, today's numbers, we continue to see that equity trading solid, the fixed income was actually a little bit better than what we saw from Goldman Sachs yesterday.
You're seeing the banks control expenses pretty well, and then we're not really seeing the investment banking numbers are solid, and then we're not really seeing any big red flags in terms of.
So JPMorgan, Citigroup both had provisions that were better than expected.
Now Wells Fargo did you kind of see an increase in non-performing loans, right?
So that's that's the one stock that's trading a little bit lower this morning.
But given all of the headlines that we've heard about private credit and concerns related to kind of credit quality, there's not a big red flag at this point.
And we'll continue to monitor what the management teams as well as the C-suite have to say in the earnings column as we go through the season, but I do want to get your take on the S&P 500 turning positive yesterday.
So I'm sure you're continuing to monitor levels, but you highlighted a lot of Concerns regarding inflation as well as the macro that are going to affect the bottom line for a lot of these organizations.
So the big question is also about rate cuts.
So why are we seeing US stocks recover in terms of the major so look, you know, in the context of kind of around the globe in the global marketplace, right.
Given the US kind of energy independence, we are kind of the safe haven now.
We did see kind of markets kind of reset.
You saw the pullback in US equity markets where the S&P was down about 8%, peaked the trough.
We had 5 consecutive weeks of declines and we broke that 2 weeks ago and now we're kind of on the back of two back to back 3% gains and we're off to a A good start thus far this week.
You know, you did reset quite a bit of the positioning and you know there is still this kind of ongoing hope, right, that we are going to see an off-ramp here from the administration that they don't necessarily want to escalate the situation.
You know, talks are still ongoing, so as long as that kind of stays in check, right, you're going to see kind of this underlying bid within the.
Market and I highlighted in our Friday note as we've seen kind of volatility we always talk about these systematic flows that come in and out of the market and as we've seen volatility of the VIX has gone from around 30 to back under 20.
We saw the move index move significantly significantly lower last week and what that does is set up after all of these. have just kind of reduced exposure were caught wrong footed kind of into kind of that ceasefire and not fully invested that kind of sets up the backdrop for there to be this systematic underlying bid.
You saw some of that yesterday with kind of the move that we had in the last 1015 minutes of trading where you saw kind of a pretty big jump in equities as you saw some of those flows.
Into the market.
Yes, and speaking of which, finally, I do want to get your take on big tech, especially ahead of earnings season for those names.
But what do you make of that category and within that sector, what are you watching and why?
Yes, there's so many cross currents, right?
So if you think about the mega cap tech stocks, right, the big question is going to be around kind of spending, how they're kind of baseline businesses. are performing, but the idea of spending if they're actually starting to see any return on investment in all the spending that they've been doing the other kind of big segregation is kind of the hardware side and the software side in terms of semis and hardware that has been the primary driver of a lot of the earnings increases that we've seen since the start of the quarter.
The tech sector earnings estimates for the quarter have increased by over 10% to 45% on a year over year basis.
That's primarily coming from memory, from the hardware, the optical names, and we continue to hear of the positive commentary about spending.
Those companies have largely kind of pre-announced, so I don't know that we're going to get a whole lot more juice from that, but we're, you'll have to see how the stocks trade with kind of strong numbers.
The flip side of that has been software which has been totally decimated by this AI anxiety and the disruption concerns.
Yesterday we had a pretty big snap. that sector kind of after after moving and we looked at it over the last year, semiconductors have outperformed software by about 150%, so it's a massive jaws-like move in kind of the performance of those sectors.
Those management teams have a very difficult set up here in that.
They have to try to break that narrative.
The numbers last quarter were actually pretty solid.
You had some commentary about longer sales cycle that did help to stabilize things, but it's going to be very hard for them to kind of really break that narrative, and I think the markets are going to be focusing a lot on companies outside of software, listening to where they kind of.
Capex budget or tech Cap budgets are and where they're spending and how they're adjusting that to get a sense of if we are starting to see some sort of real turn kind of in kind of kind of enterprise software spending.
Well, Michael, a lot of moving parts here, so I appreciate your time.
Thank you so much for joining us and thank you so much for all of your insights.
Thanks for having me.
Thank you.
