Wall Street is looking at a lower open on this Monday morning as the ceasefire between the US and Iran appear in a flux ahead of the expiration of Tuesday's ceasefire.
Now hopes for cooling.
US and Iran tensions sparked a massive April rally, sending major indexes to fresh records.
The S&P 500 closed above the 7000 level for the first time last week after dropping 9% from its January peak.
The benchmark has stormed back 12% since its March 30th low, and tech.
Caps are leading the charge in names like Alphabet that a platforms shine in the rebound after taking an initial hit, lifting the broader tech sector to outperform the market.
Well joining me on this Monday morning is Michael Reinking, Senior Market Strategist at the New York Stock Exchange.
Michael, good morning.
Thank you so much for joining me.
Good morning, Rey.
Thanks for having me back.
Well, here we are on this Monday morning after the developments of Sunday.
So geopolitics are front and center, but it is also earnings week here.
So I think I do want to ask you by starting out.
With the gains we've seen in the S&P 500 year to date versus what we've seen since March 30th.
Tell us what's happening.
Yes, I mean it's been a pretty historic rally by kind of all accounts, right?
There's been a lot of different market followers kind of just highlighting kind of what a significant rally, kind of the bottom that we've had kind of off of the lows right at the end of Q1, right?
So you're now looking at the NYC 100, which tracks the 100 largest tech companies, is up 13.
Consecutive days it's up about 20% kind of over that time frame, right?
And we're seeing kind of the major indices started to push to fresh all-time highs last week, right?
I mean a lot of that is driven by kind of just mispositioning, you know, where you had kind of people who had cut exposure with kind of all the geopolitical risk out there, you know, we're hedging for kind of tail risk to the downside, and as we got that ceasefire that kind of really kicked off a strong upside rally.
You know, the tweet storm that we got from President Trump on Friday, that kind of really accelerated that to the upside, right?
And you also kind of factor in that we were, you know, in options exploration week, right, so you have all that positioning that is kind of caught wrong footed, people starting to try to play kind of for upside and you kind of push that, you start to get this kind of momentum push that that we've seen over the last 2 weeks, 3 weeks now.
It's sort of interesting, right?
We had, you know, there's some more questions around what's happening kind of with the ceasefire and negotiations, but if you look at the market today, right, despite that, over the weekend, you're seeing a pretty modest pullback, right?
We have seen kind of oil prices have jumped again.
We're kind of in the mid 90s for ICE rent.
But S&P futures are down about 20 points, less than 0.5%, right?
So in the context of this rally, that's a pretty, pretty modest pullback.
And Michael, there are a lot of things happening below the surface, and I think you and I have been monitoring social media for some of those unique stats regarding what we saw in the rally.
But I think when we take a step back and look at the sectors that gained since March 30th versus year to date, we are seeing.
Divergence.
So since March 30th, gains are coming from IT, communications, consumer discretionary versus year to date leaders, energy, materials, and industrial.
So do you expect this to continue, right?
So I mean what we've seen, and it was actually something that we talked about in the last couple of weeks, is that you've had all those mega cap tech stocks kind of really kind of kind of repriced right by underperforming throughout the year.
And so once again you kind of get into This point where you saw multiples contract pretty significantly, right, so there was this opportunity to kind of come back in and kind of buy those stocks.
We're going to really get some answers to that question really next week, right, because this week is a very heavy earnings week.
We have about 20% of the S&P 500 that's reporting.
We will start to hear from kind of the software sector and some other kind of semi semi equipment.
But the mega cap tech stocks going to really start next week and look, I mean, the other big driver we talked about the mega cap tax, but software has also seen a pretty significant bounce, right?
And I think that had been a pretty crowded position you've seen some short covering come into those names, and those names kind of got to a point where I think people were willing to kind of take a shot right after.
A kind of a pretty significant decline.
We had pointed out that the software sector had underperformed the semiconductor sector by 150% over the last year, right?
So you had a very significant repricing of that risk.
You started to see that also bled into some of the private credit names which have also rebounded pretty significantly and so we'll have to hear what the commentary is from software names during that earnings season.
I would, I would say that it's going to be kind of reasonably positive just like it was last time around, like last quarter, and that can kind of help kind of stabilize that sector at least in the short term.
Yes, and also on the calendar this week we do get key economic data including retail sales, so that is something that we're paying attention to.
But of course the confirmation hearing for Kevin Warsh.
So what are you paying attention to and why?
Yes, so look, I think the economic data is important.
But what we've heard from companies since the start of earnings season is that the backdrop has been pretty resilient, right, and we heard from the banks that have that look at where the consumer is.
They have suggested consumer spending has been pretty solid.
You saw the economic data last week also kind of suggests that that markets are kind of weathering of this recent storm pretty well, or the economy is weathering the recent storm pretty well.
Look, I think in terms of Kevin Warsh, I think it will be interesting to make for interesting TV.
I don't think it's necessarily going to really move.
Markets per se, kind of in the next day or two, but it will make for an interesting confirmation hearing just to see where his stances are, try to get a better sense of what he's going to try to, how he's going to position the Federal Reserve if and when he does take over, but I don't think that's anything that's going to necessarily move markets in the near term.
That kind of unfortunately kind of takes us back to watching social media yet again, right, but in just a different way and just kind of paying attention to what's happening on the geopolitical front and that's going to very much to write the story for this week and finally, Michael, I do want to ask you about this interesting statistic.
So given that rally, that historic rally we saw last week, apparently in In terms of breadth, it was very narrow.
So beneath the surface, about only 2.5% of stocks actually hit 52 week highs.
So what is that telling you when you zoom out?
Yes, I mean, you know, look, we had this kind of squeeze to the upside, right, and you are seeing the breadth narrow kind of pretty significantly.
We had seen at the start of this year, right, the breadth expansion and you've kind of narrowed that back out again.
I think what it tells me right now is that you know we're We need to kind of consolidate some of these gains and then hopefully we get come out the back end of this geopolitical situation and all the things that we sort of hoped for at the start of this year continue to come to fruition, being kind of an acceleration of the economic data with fiscal policy tailwinds and helping to really kind of reiterate the earnings growth reset.
That we've seen since the start of this year we've seen these positive revisions.
We just need to kind of confirm that the environment hasn't changed, and then you can start to see the rest of the market really kind of play some catch up.
Well, Michael, great having you on the show this morning.
We'll see how this week plays out.
So thank you as always for weighing in.
