By Panos Mourdoukoutas
Stocks extended their rebound into the third week of April, with the S&P 500 and Nasdaq reaching new record highs following announcements by President Donald Trump and Iran to reopen the Strait of Hormuz, easing concerns over global energy supply disruptions.
The decline in oil prices and Treasury bond yields supported investor appetite for risk assets, helping fuel a broad-based rally led by software, financial, travel, and leisure stocks, small caps, and a strong initial public offering.
For the week, the Dow Jones Industrial Average rose by 3.19 percent to 49,447, near its weekly high. The S&P 500 gained 4.54 percent to 7,126, surpassing 7,100 for the first time. The Nasdaq Composite led for a third consecutive week, surging 6.84 percent to an all-time high, while the Russell 2000 advanced 5.56 percent.
Market volatility rose early in the week but eased by the end. The Chicago Board Options Exchange Volatility Index closed at 17.48, down 9.1 percent for the week.
Stocks opened lower on April 13 as investors took profits following the previous week’s gains and reacted to the failure of U.S.–Iran peace talks in Pakistan, which pushed oil prices and bond yields higher over the weekend.
Selling pressure proved limited, however, and dip buyers returned later in the morning, driving a broad rally. Small-cap and technology stocks led gains, with the Russell 2000 and Nasdaq rising by 1.52 percent and 1.23 percent, respectively. The S&P 500 and Dow Jones Industrial Average gained 1.02 percent and 0.63 percent, respectively.
A reversal in oil prices helped support the turnaround, with West Texas Intermediate crude futures falling by more than 2 percent to below $97 per barrel on renewed expectations that the United States and Iran could resume negotiations.
Treasury yields also declined, with the 10-year yield closing at 4.25 percent after reaching 4.36 percent earlier in the session.
The rally gained momentum on April 14 as optimism over additional peace talks continued to weigh on oil prices and bond yields.
Investor sentiment was further supported by better-than-expected inflation data. The U.S. producer price index rose 4.0 percent annually in March, below expectations of 4.6 percent.
All major indexes closed solidly higher, led again by the Nasdaq and Russell 2000, which rose by 1.96 percent and 1.26 percent, respectively. The S&P 500 gained 1.18 percent, while the Dow rose by 0.66 percent.
Markets largely shrugged off a warning from the International Monetary Fund about a potential global slowdown, as well as mixed earnings reports from major banks including JPMorgan, Wells Fargo, and Citigroup.
Investor optimism over a potential end to the Iran war helped extend the rally in equities on April 15. The Nasdaq and S&P 500 reached new highs, gaining by 1.59 percent and 0.80 percent, respectively. The Russell 2000 rose by 0.30 percent, while the Dow ended the session little changed.
Technology stocks led gains, with Microsoft and Oracle rising by 4.63 percent and 4.18 percent, respectively. Financial stocks also advanced after stronger-than-expected earnings from Morgan Stanley and Bank of America, which gained 4.52 percent and 1.82 percent, respectively.
“Bank earnings were much better than expected, as the results were strong, but expectations were also lowered given the past few months of negative market sentiment,” Paul Stanley, chief investment officer at Granite Bay Wealth Management, told The Epoch Times.
“Lower expectations are always a welcome dynamic for earnings season, since it gives companies a lower bar to clear, and that could add some extra momentum to markets over the coming months.”
The rally continued on April 16, with the S&P 500 and Nasdaq closed at new record highs, rising by 0.28 percent and 0.36 percent, respectively. The Dow and Russell 2000 also advanced as gains broadened across sectors.
Technology shares again led the market, with Microsoft and Oracle rising by 2.20 percent and 5.02 percent, respectively. Pepsi also gained by 2.28 percent following a solid earnings report.
Stocks rose despite a renewed increase in oil prices and bond yields, reflecting continued investor confidence. West Texas Intermediate crude futures climbed by about 4 percent to above $95 per barrel as uncertainty surrounding U.S.–Iran negotiations persisted.
Markets ended the week on a strong note after reports on April 17 that Iran had reopened the Strait of Hormuz, easing concerns over energy supply disruptions.
Oil prices fell sharply, with West Texas Intermediate crude futures dropping by more than 10 percent to about $84 per barrel. Treasury yields also declined.
The drop in energy prices boosted sectors sensitive to fuel costs, including travel and leisure, transportation, utilities, homebuilding, and small-cap stocks.
Investor sentiment was further supported by a strong initial public offering by drone maker Aevex, which raised $320 million and rose by 23 percent in its debut.
All major indexes closed higher, led by the Russell 2000 and Dow, which gained by 2.11 percent and 1.79 percent, respectively. The S&P 500 and Nasdaq rose by 1.22 percent and 1.52 percent, respectively.
“It’s refreshing that this is the first Friday trading session in well over a month where there isn’t this underlying fear heading into the weekend, which is another sign that this market correction has likely run its course,” Stanley said.
“The Iran situation is still volatile, and oil prices are still elevated, but stocks have now already priced in these risks and appear ready to move onto earnings and fundamentals.”
Stanley said the market’s recent pullback appears to have been a correction rather than the start of a prolonged downturn.
“The speed and V-shaped nature suggest that this was a correction and not the start of a bear market. While corrections can involve a retest of the low, we would view any retests as a buying opportunity for long-term investors,” he added.
