The market witnessed the month of March retreat into negative territory for 2026. On the last trading day of the month, markets bounced off the lows and powered higher through April after a sideways start. The S&P 500 hit a new high April 30th and has continued to climb into the first full trading week of May.
Crude oil is trading at just over $95 per barrel, as it reacts to the latest potential end of war rhetoric between the U.S. and Iran. The markets have, as is typical, responded positively. After the March correction and war worries, the market was a coiled spring.
That coil has been released by excellent Q1 earnings. The pace of these price moves are dramatic. Technology is once again leading the upward momentum. Earnings have been rewarded with not just the typical +3%-5% pricing moves, but with double digit percentage increases.
S&P 500: Apr +10.43% YTD +5.31%
DOW: Apr +7.14% YTD +3.31%
NASDAQ: Apr +15.29% YTD +7.10%
Russell 2000: Apr +12.22% YTD +12.81%
Sector Performance YTD thru April:
Communication Services +10.02%
Consumer Discretionary +1.28%
Consumer Staples +10.17%
Energy +32.43%
Financials -4.90%
Healthcare -5.83%
Industrials +12.54%
Technology +6.57%
Materials +12.19%
Real Estate +10.72%
Utilities +9.72%
Current U.S. Treasury Yields:
6 Month Bill 3.69%
2 Year Note 3.86%
5 Year Note 3.99%
10 Year Note 4.35%
30 Year Note 4.94%
The Economy and the Fed:
Private payrolls exceeded the consensus estimate of 84,000, adding 109,000 jobs in April. March numbers were revised down by 1,000 hires. The labor market continues to be calm. Inflation, though not at the Fed’s 2% target, isn’t disrupting the labor force. The Fed held rates steady, as was expected last week. A rate cut by the Fed is currently off the table for 2026. A rate increase before year-end may be more likely, barring the economy suddenly weakening.
The Kevin Warsh confirmation to be the next Fed Chair is now fully on track. U.S. Attorney Jeanine Pirro has essentially abandoned appealing the judge’s ruling on her case against Chair Powell. However, it is not an all clear. As such, Powell most likely will stick around until 2028 on the Fed’s Board of Governors. Doing so is clearly political and may complicate Warsh’s initial approach to Fed governance.
Should oil remain elevated for the remainder of 2026, GDP and real consumption is estimated to take, roughly, a 1% hit…not optimum but not recessionary. Thankfully, the U.S. energy space is far stronger than the 1970s.
Looking Ahead:
Earnings have been tremendous. Capital expenditures aren’t slowing down on the AI front. Demand is robust. There will be some constraints in meeting the demand, elevating prices and delays in build-out. However, the AI infrastructure spending theme will continue to drive this investment period.
Despite the market surge from the typical mega-cap tech names, the rest of the market is participating. Value stocks, industrials and income-oriented equities all are contributing. FOMO is real and there is still over $7 trillion in money market funds uninvested. That is a good tailwind for equities.
We remain constructive on the market, even bullish. The Iran war is the main overhang. Remove this variable and the market would catapult higher. The market is focused on earnings and will move higher despite the war and the Strait of Hormuz stalemate.