Iran Deadline Looms, Putting Focus on Oil, Yields

0:05Welcome to the Schwab Market Update Podcast, where we prepare you for each trading day with a recap of recent news and a look at what's ahead. I'm Keith Lansford, and here is Schwab's early look at the markets for Tuesday, April 7th. Tonight marks President Trump's deadline for Iran to reopen the Strait of Hormuz, possibly creating market tension considering his threats if Iran doesn't do so. Crude oil could set the pace for stocks, with data and earnings sparse. The market will likely be on tenterhooks about the war, after reports yesterday that Iran had rejected a ceasefire proposal and Trump had called it not good enough.

0:48The Siebel Volatility Index, or VIX, climbed nearly 2.5 percent, almost 25 late Monday, a possible caution sign that contrasts with slight gains in stocks. Overall, yesterday's session was relatively dull considering the conflict and Friday's blowout jobs report. In other signs of caution early this week, Treasury yields pivoted around 4.33 % for the 10-year note, still up more than 30 basis points from a month ago, as crude oil prices continued their upward march to almost$113 a barrel by late Monday. Technically, the S &P 500 index remains well below its 200-day moving average of 6 ,647, So long as crude remains above$110 and the index stays below that 200-day level, it's hard to say the market has truly recovered from its March slump.

1:40Technically, however, yesterday's close looked positive as the S &P 500 index rose in the final minutes to finish close to its intraday high. The slight rise, even as VIX edged up and yields stabilized, might reflect some investors taking both sides of the war, so to speak. They appear to want protection in case things got worse, but also sought to keep money in the market in case a ceasefire surfaced. One thing to monitor is today's three-year Treasury note auction, results of which should be available early this afternoon. The 10-year note auction tomorrow was also likely to draw attention after several auctions last month saw lackluster demand.

2:21Treasury yields are up since then, but have retreated slightly from recent highs near 4.5 % for the 10-year note and 4 % for the 2-year note. The rally was fueled by rising oil prices that sent inflation expectations higher. Inflation worries percolated last week with the prices paid component of the March ISM Manufacturing Index, which registered 78.3%, well above the 70.5 % level for February and the highest since June of 2022. This suggests companies are paying more for raw materials, a possible headwind for margins.

2:59In Data Monday, the ISM's non-manufacturing PMI for March was 54%, a bit lighter than the expected 54.9%, but above the 50 % needed to indicate expansion. What stuck out was a rise in the report's prices index to 70.7%, the biggest one-month increase in more than 13 years. The report's employment index, meanwhile, retreated. Higher prices and lower employment, if that's a trend beyond this one report, could make life hard for the Federal Reserve. Looking beyond that, inflation data is front and center this week. February's Personal Consumption Expenditures, or PCE Price Index, the Fed's favorite inflation gauge comes out Thursday.

3:44The core PCE price index, which excludes more volatile food and energy prices, rose 3.1 % year-over-year in January, its highest level in nearly two years. Then, on Friday, investors will check the March Consumer Price Index data. It will be the first inflation report to include data from after the Iran war began. In February, CPI rose just 2.4 % year-over-year, but rising oil and gasoline prices could lift March's headline figure. Other major data straight ahead include the final government estimate for fourth quarter gross domestic product or GDP growth and minutes from the Fed's March meeting.

4:24Fed minutes tomorrow afternoon could be a highlight outlining policymakers thinking at a meeting where they kept rates paused. The rate outlook grew slightly more hawkish following last Friday's March nonfarm payrolls report showing jobs growth of 178 ,000 that almost tripled expectations. Odds of a rate cut or a rate hike this year were evenly divided as of late Monday at about 10 % each, according to the CME FedWatch tool. There's a 79 % chance that rates stay paused all year. On the earnings front, it's a light week before banks begin reporting with only a few major companies on the calendar.

5:04Delta Airlines tomorrow morning, however, could draw attention amid surging jet fuel prices, even after the OPEC cartel yesterday promised to hike output next month. Consensuses were Delta to post earnings per share of 61 cents, which would mark a 33 % euro-view increase. Other earnings highlights include apparel firm Levi Strauss & Company today, followed tomorrow by beer, wine and spirits maker Constellation Brands and building materials giant RPM International. First quarter earnings accelerate next week, starting with Goldman Sachs on Monday and followed by JPMorgan Chase and several other major banks the next day.

5:45Bank stocks rose today, possibly reflecting some pre-earning season interest in a sector that fell on hard times last month amid worries about the private credit market. FACSET pegs overall first-quarter S &P 500 earnings per share growth at a healthy 13.2 % and expects 10 of 11 sectors to report year-over-year earnings growth in the first quarter, led by technology. Only energy is expected to be red. U.S. market indexes added bulk yesterday, with the S &P 500 index posting its fourth straight game, but volume was very light, possibly due to Sunday's Easter holiday. The slow trading might signal lack of conviction, meaning Monday's rally could be discounted to some extent.

6:30Several key markets in Europe were closed Monday for the holiday, which might have contributed to the light volume. The rally also worked against a rising VIX, which historically points to weaker stock action. Additionally, higher crude didn't dent the positive mood on Wall Street, which might be getting a lift from positive earnings growth expectations. Gains were broad as 8 of 11 S &P sectors rose Monday. Communication services and consumer discretionary were among the leaders, but no single sector climbed or fell more than 1%, underscoring the relative lack of momentum in either direction. Communications benefited from strength in meta-platforms and Alphabet, which extended last week's rebound from recent lows, Briefing.com noted.

7:14The financial sector got a lift from crypto stocks. Checking individual stocks that moved Monday, crypto-related names including Strategy and Coinbase rallied nearly 6 % and 2 % respectively, in line with a 4 % gain for Bitcoin. Sometimes rallies in Bitcoin signal risk-on sentiment in the market. Semiconductor stocks Intel and Micron added 1 % and 3 % respectively, lifted by analysts' reports that chip prices are rising amid shortages brought about by heavy demand. Paramount Skydance climbed almost 3.6%, helped by a Wall Street Journal report that the company has received signed equity commitments of close to$24 billion from three sovereign wealth funds led by Saudi Arabia to help back its takeover of Warner Brothers' discovery.

8:04Dow slipped 1.6 % after a downgrade from Bank of America, which now rates the stock at underperform. form. Shares of military contractor Lockheed Martin climbed 2 % Monday and are up 28 % year-to-date, helped by war demand and President Trump's proposed increase in defense spending for next year. And Soleno Therapeutics climbed 33 % after an announcement that Neurocrin Biosciences has entered into a definitive agreement to acquire Soleno for$53 per share in cash. Neurocrin made the move to solidify its endocrinology and rare disease portfolio, is said in a press conference. The Dow Jones Industrial Average added 165.21 points Monday, or 0.36%, to 46 ,669.88.

8:58The S &P 500 Index climbed 29.14 points, or 0.44%, to 6 ,811.83. And the NASDAQ Composite rose 117.15 points or 0.54 % to 21 ,996.34. This has been the Schwab Market Update Podcast. To stay informed, visit www.schwab.com slash market update or follow us for free in your favorite podcasting app. And if you like what you've heard, please consider leaving us a rating or a review. It really helps new listeners find the show. Join us for another update tomorrow.

9:45For important disclosures, see the show notes and schwab.com slash market update podcast.