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Stocks Rebound as War Fears Ease Slightly
Wall Street's main indices edged higher in volatile trading on Monday, recovering some losses from the previous session. The Dow Jones Industrial Average gained 0.48%, the S&P 500 advanced 0.32%, and the Nasdaq Composite moved up 0.19% in early trading. This recovery followed remarks from U.S. President Donald Trump suggesting talks with Iran were underway, coupled with warnings of potential strikes on its infrastructure. Tensions were further amplified over the weekend with the involvement of Yemen's Iran-backed Houthi militia in the growing Middle East conflict.
Energy stocks led the day's gains, with the S&P 500 Energy Index climbing 1.5%. Shares of major players like Exxon Mobil rose 3%, and Chevron added 1.5%. Sam Stovall, chief investment strategist at CFRA Research, noted that despite the conflict's implications, the S&P 500 remains down less than 10% since the war began, suggesting investors' ability to withstand the impact. He called Monday's rise a technical bounce, noting many sectors were oversold.
Financial shares also performed well, with the sector seeing a 0.8% rise. This uplift was partly fueled by new guidelines from the U.S. Department of Labor clarifying how plan managers can include investments like private equity and cryptocurrencies in 401(k)s. Major asset managers saw gains, with Blackstone up 1.7%, KKR gaining 1.4%, and Apollo Global Management adding 1%.
Inflation Worries Return as Oil Prices Climb
Despite the broader market uptick, where nine of the 11 major S&P 500 sectors traded in positive territory, major indices like the Dow, Nasdaq, and Russell 2000 are still in correction territory since the conflict began. Higher oil prices, driven by the conflict, have brought back inflation fears. As a result, expectations for Federal Reserve rate cuts this year have dropped significantly. CME Group's FedWatch Tool now shows markets are not expecting any cuts, a big change from anticipating two before the conflict.
Analyst Take and What's Next
Morgan Stanley lowered its rating on global equities to 'equal weight' from 'overweight.' However, it noted increasing investment into U.S. stocks and bonds, suggesting the U.S. may be seen again as a safe place for investments. Investors are now watching for comments from Federal Reserve Chair Jerome Powell and New York Fed President John Williams today, along with key labor market data this week, including March jobs numbers.
In individual stock news, Sysco shares dropped 12% after announcing it would buy Jetro Restaurant Depot for $29 billion, including debt. Metal stocks surged as aluminum prices neared four-year highs. Alcoa jumped 12% and Century Aluminum rose 13.6%. U.S. markets will close on Friday for the Good Friday holiday.