• Stocks close at highs as hopes for an Iran peace deal rise – U.S. equities were sharply higher on Wednesday, with the S&P 500 and Nasdaq closing at all-time highs. The rally was driven by reports that a U.S.–Iran deal could come in the days ahead. Oil prices fell on this news, with WTI down about 7% toward $95 levels. In fixed income, Treasury yields moved lower as declining energy prices reduced near-term inflation concerns, supporting bond prices. Globally, equity markets were broadly higher, with European stocks gaining and several Asian markets advancing as risk sentiment improved. Overall, markets continue to be underpinned by strong and accelerating corporate earnings and resilient economic fundamentals, even as investors navigate ongoing geopolitical uncertainty.
   
• Earnings trends set the tone for markets – First-quarter earnings season is in full swing, with roughly 70% of companies in the S&P 500 having already reported and more than 70 additional companies scheduled to report over the next three days. Results have been strong, with S&P 500 earnings per share on pace to grow 25% year-over-year in the first quarter, double the 12% growth expected at the end of March. A key driver has been continued strength in AI-related investment trends, with the technology and communication services sectors expected to deliver earnings growth of roughly 50% for the quarter. More recently, labor-market conditions have shown signs of stabilization, with nonfarm payrolls rebounding by 178,000 in March and initial jobless claims posting one of their lowest readings on record last week. While risks surrounding the war in Iran remain, we believe robust earnings growth and steady economic activity create a favorable backdrop for equity markets over the balance of the year.
   
• Economic data remains solid – Recent economic data help reinforce what earnings have been telling us. The U.S. economy remains on solid footing. Real GDP grew at a 2% annualized pace in the first quarter, rebounding from the drag caused by last year’s government shutdown. Beyond the headline number, the details were even more favorable, with final sales to private domestic purchasers, a measure that strips out inventory swings, government spending, and trade effects, rising 2.5%, pointing to heathy private‑sector activity. Consumer spending slowed modestly but remains resilient. Rising incomes and higher tax refunds helped offset higher gasoline costs. While energy prices may increasingly weigh on spending as refund season fades, there is no evidence yet of broad deterioration in consumer demand. Elsewhere, business investment was the clear standout. Spending on IT equipment and software alone added roughly 1.5% to GDP growth, reflecting continued AI investment. Taken together, the data suggest that while higher oil prices may act as a headwind if they persist, there is currently little indication that the U.S. economy is cracking.

Mona Mahajan;
Investment Strategy

^{Source for all data: FactSet}

• Stocks gain as Middle East tensions cool – U.S. equity markets closed higher on Tuesday, while oil prices moved lower, as a lack of further escalation in tensions with Iran supported investor sentiment, in our view. The move followed renewed military action on Monday that raised concerns about the durability of the fragile ceasefire between the U.S. and Iran. Leadership was broad-based, with all 11 sectors of the S&P 500 finishing higher, led by technology and materials. On the economic front, March JOLTS job openings were little changed from the prior month at roughly 6.9 million, suggesting stable demand for labor, while the ISM services PMI declined slightly to 53.6 but remained well above the expansion-contraction threshold of 50, signaling steady business activity, in our view. Bond yields closed slightly lower, with the 10-year Treasury yield finishing at 4.42% and the 2-year yield at 3.94%.
   
• Earnings and economic trends set the tone for markets – First-quarter earnings season is in full swing, with roughly 70% of companies in the S&P 500 having already reported and more than 70 additional companies scheduled to report over the next three days. Results have been strong, with S&P 500 earnings per share on pace to grow 25% year-over-year in the first quarter, double the 12% growth expected at the end of March. A key driver has been continued strength in AI-related investment trends, with the technology and communication services sectors expected to deliver earnings growth of roughly 50% for the quarter. On the economic front, investors will get an updated read on labor-market conditions beginning today with March JOLTS job openings, while Friday’s nonfarm-payrolls report will round out the week. More recently, labor-market conditions have shown signs of stabilization, with nonfarm payrolls rebounding by 178,000 in March and initial jobless claims posting one of their lowest readings on record last week. While risks surrounding the war in Iran remain, we believe robust earnings growth and steady economic activity create a favorable backdrop for equity markets over the balance of the year.
   
• Middle East tensions remain in focus – Markets began the week with a modest risk-off move, as military action in the Strait of Hormuz on Monday raised concerns about the durability of the fragile ceasefire between the U.S. and Iran announced in early April. However, stocks rebounded on Tuesday, aided, in our view, by a lack of further escalation and rhetoric from both the U.S. and Iran that points to a preference for a diplomatic solution rather than a further escalation in military action. In response, equity markets closed higher, while oil prices traded lower. Heightened tensions with Iran could slow the pace of gains we have seen in equity markets in recent weeks, particularly after the S&P 500 and Nasdaq each posted their strongest monthly performance in April since the post-pandemic rebound in 2020. However, we believe the longer-term outlook remains favorable for equity markets, supported by steady economic activity and strong corporate profit trends.

Brock Weimer, CFA;
Investment Strategy

^{Source for all data: FactSet}

• Markets slide as Middle East tensions flare – Equity markets fell today as renewed tensions in the Middle East pushed oil prices higher. The U.S. and Iran exchanged fire as the U.S. military sought to establish a passage through the important Strait of Hormuz, with separate Iranian missile strikes fired at the U.A.E. In response, WTI oil hit $105 per barrel at the close of the session, up 3% over the day as investors price a greater risk of more prolonged disruptions to energy markets from this conflict. Equities moved lower, with the Dow Jones Industrial Average index down more than 1%, although better performance among tech stocks helped cushion declines in the S&P 500 index and the Nasdaq too. Bonds sold off sharply in the face of higher oil prices, with the yield on the two-year U.S. Treasury note up to 3.95% and markets no longer pricing any material chance of Fed rate cuts this year.
• Renewed military action casts doubt over ceasefire – Coming into this week the conflict in the Middle East remained in stalemate, with the ceasefire between the U.S. and Iran announced in early April having held, but with few signs of material progress toward a more lasting peace agreement emerging. Iran's latest peace plan, sent over the weekend, called for reparations, Iranian oversight of traffic through the Strait of Hormuz, and no compromises around its nuclear program, and was quickly rebuffed by President Trump. Today's military action follows a U.S. push to open a channel through the Strait of Hormuz, challenging Iran's control over this waterway. The U.S. military characterized today's conflict as "defensive," and it is not clear that the ceasefire with Iran has been broken. However, the limited progress toward a peace deal, and renewed military tensions in the Persian Gulf, highlight the risk of a more prolonged or larger disruption to global energy markets, which could threaten the increased optimism priced into equity markets in recent weeks.
• Growth and earnings backdrop remain supportive – We think rising market optimism in part reflects a growth backdrop that, so far, looks resilient to the oil price spike, and further signs of improving corporate earnings growth. U.S. first-quarter GDP delivered solid-looking underlying growth, helped by resilient household consumption and strong business investment. Meanwhile, the labor market looks to be in good shape, in our view, and consensus expects this Friday's nonfarm-payroll report to support this assessment, with a gain of 60,000 jobs in April seen keeping the unemployment rate steady at 4.3%. Meanwhile, we will also get a host of consumer and business sentiment data, while the final run of first-quarter earnings reports will help provide further insights into profitability across the corporate sector. In our view, the fundamentals around growth and earnings remain supportive for stocks, even if oil prices continue to pose some downside risk to the outlook.

James McCann;
Investment Strategy

^{Source for all data: Bloomberg, FactSet}

• Stocks hit new highs – Equity markets kicked off May on the front foot, building on a rally over April which was the strongest seen in a single month since 2020. The S&P 500 was up 0.3% over the session, pushing this large-cap index to a new record high, while the Nasdaq index, which has been bolstered by strong performance in the tech sector over recent weeks, was up an even better 0.9%. WTI oil prices fell over the day, helped by reports that Iran has delivered a new peace proposal to the U.S., but at $102 per barrel these remain elevated. Bonds were little changed, with the yield on the 10-year U.S. Treasury note trading at 4.38%. Gold prices were steady around $4,600 per ounce, and the dollar continues to drift lower against a basket of trade-weighted international currencies, with the rally in the greenback seen through March following the outbreak of the conflict in Iran having now fully reversed.
   
• Stalemate in the Middle East – The ceasefire between the U.S. and Iran continues to hold, but we are seeing limited signs of progress toward a more permanent peace agreement that enables the reopening of the Strait of Hormuz. Markets reacted positively this morning to reports that Iran has delivered a new peace proposal to the U.S. via intermediaries in Pakistan. However, subsequent commentary from both sides indicated that reaching an agreement remains challenging. Iran's foreign minister warned that the U.S. should not pursue "excessive demands" while President Trump commented that Iran is "asking for things I can't agree with". Reports have surfaced that the commander in chief has been briefed on another round of potential military strikes. In our view, we likely need to see more concrete signs of progress start to emerge from these talks to avert further increases in oil prices which could threaten some of the increasing optimism priced into markets.
   
• A big data week – We think market optimism in part reflects hopes for a normalization in global energy supplies over coming months but also increasing confidence over the economic and earnings backdrop. Data over the past week support these hopes, with the economy so far resilient in the face of higher oil prices, and corporate earnings growth coming in even stronger than expected. Next week's labor-market report will help provide further insight into the economic picture, with consensus expecting a solid if unspectacular gain in payrolls of 60,000 in April, consistent with low unemployment insurance claims over the month and solid labor-market signals across a range of survey data. We will also get a host of consumer and business sentiment data, while the final run of first-quarter earnings reports will help provide further insights into profitability across the corporate sector. In our view, the fundamentals around growth and earnings remain supportive for stocks, even if oil prices continue to pose some downside risk to the outlook.

James McCann;
Investment Strategy

^{Source for all data: Bloomberg, FactSet}

• Stocks rally to close out April with earnings in the spotlight – S. equity markets traded firmly higher on Thursday as investors digested the latest wave of corporate earnings, including results from tech giants Alphabet, Amazon, Meta and Microsoft. Results were generally positive, with all four companies reporting better-than-expected sales. However, shares of Meta and Microsoft declined 8.7% and 3.9%, respectively, as investors likely weighed whether higher capital expenditure guidance will ultimately translate into stronger profits, in our view. The S&P 500 gained 1.0% on the day and finished April up 10.4%, its strongest monthly gain since November 2020. It was also a busy day on the economic calendar, with real GDP growing at a 2.0% annualized rate in the first quarter, headline Personal Consumption Expenditures (PCE) inflation rising 3.5% year-over-year in March, and core PCE increasing 3.2%. Additionally, initial jobless claims declined to 189,000 last week, the lowest reading since 1969. Overseas, Asian markets were mostly lower overnight, while European markets traded higher after the Bank of England and European Central Bank left their policy rates unchanged. Bond yields declined, with the 10-year Treasury yield finishing at 4.38% and the 2-year yield at 3.88%. In commodity markets, oil prices also moved lower, with WTI crude oil settling around $105 per barrel.
   
• Economic health check – In addition to a busy day of corporate earnings, Thursday also brought a slew of key economic data. First-quarter real GDP rose at a 2.0% annualized pace, below expectations for a 2.3% gain but an improvement from the 0.5% reading in the government-shutdown-impacted fourth quarter. Looking under the hood, a 4.4% rebound in government spending and a 10.4% gain in nonresidential investment were bright spots for the quarter. On the investment side, a 43.4% annualized jump in information-processing equipment played a large role in the strength in nonresidential investment, likely underscoring continued momentum in AI-related investment trends. Personal consumption, which makes up the lion’s share of GDP, grew at a 1.6% annualized rate, below the average quarterly gain of roughly 2.75% over the past three years. Thursday’s data also included the Fed’s preferred inflation gauge, the Personal Consumption Expenditures price index for March. Headline prices rose 0.7% for the month, while core PCE — which excludes food and energy — increased 0.3%, in line with expectations. The March gain brought the annual change in core PCE to 3.2%, the highest since January 2024. Meanwhile, initial jobless claims declined to 189,000 last week, the lowest weekly reading since 1969. On balance, we would characterize Thursday’s data as evidence that economic activity remains steady, supported by strong corporate investment trends and a stable labor market, despite the recent move higher in inflation. While the war in Iran poses downside risks to economic activity if it escalates further or extends well into the second half of the year, our base case calls for steady growth throughout 2026, with real GDP likely to expand by around 2% this year.
   
• Tech earnings in focus – Corporate earnings remain front and center, with four members of the Magnificent 7* — Alphabet, Amazon, Meta and Microsoft — reporting results after the market close yesterday, and Apple set to report after the bell today. Results were broadly positive for the quarter, with all four companies topping expectations on both the top and bottom lines. However, the market reaction was mixed, with Meta and Microsoft closing sharply lower. In our view, this highlights the elevated bar for expectations and investor concerns around higher capital expenditure guidance for the year and whether that spending will translate into stronger profits over time. With nearly 60% of S&P 500 companies having reported first-quarter results, earnings for the index are now expected to grow 14.5% in the first quarter, up from expectations of roughly 12% at the end of March. We believe healthy profit growth, supported by resilient economic activity and strong AI investment trends, should provide a favorable backdrop for equity markets over the balance of the year.

Brock Weimer, CFA;
Investment Strategy

^{Source for all data: FactSet
*Magnificent 7 represented by Apple, Amazon, Alphabet, Meta, Microsoft, NVIDIA and Tesla.}