Yesterday, equity indices finished higher. The S&P 500 rose by 0.58% and the Nasdaq 100 strengthened by 0.91%. The Dow Jones Industrial Average added 0.05%.
Global equity markets are back at record highs. The MSCI All Country World index gained 0.4% to a record level, Asian bourses rose by about 2%, and futures point to gains in European markets at the open. The S&P 500 is posting a ninth consecutive week of gains, a streak matched only four times since 1985.
The catalyst was news of a preliminary US-Iran agreement to extend the ceasefire for 60 days and begin talks on Iran's nuclear file. The deal still needs Trump's sign-off, but the market treated the report as sufficient reason to rally. Brent fell by 1.2% to $92.60, putting May on course to be the worst month for oil since March 2020, with Brent down more than 18% this month.
Note the position of Treasury Secretary Bessent, who, when asked directly about the deal, replied only that "teams are negotiating" and reiterated Trump's three red lines: reopening the Strait of Hormuz, surrender of highly enriched uranium, and ending Iran's nuclear programme. In other words, the preliminary agreement is an extension of the ceasefire, not a resolution of the core disputes. The market is trading relief, not peace.
Nevertheless, even a temporary deal on the strait changes the inflation equation. A restoration of flows through Hormuz would lower energy prices, giving the Fed some breathing room. That said, yesterday's April consumer spending data showed that the war has already taken a real toll on US consumers: spending rose, but real incomes fell, and the savings rate dropped to an almost four-year low. The economy is still growing, but more slowly, and inflation is constraining the regulator's flexibility precisely as growth slows.
Gold fell for a third straight day to about $4,500/oz, marking the longest losing streak since October 2022. The dollar stabilized after Thursday's losses, but Wall Street warns of further upside risks for the currency as Fed-hike expectations persist. The yen trades near 159.30 per dollar. Data showed that Tokyo inflation unexpectedly eased for a sixth consecutive month, reducing pressure on the Bank of Japan. The 10-year US Treasury yield remains at 4.44%.
Technically, the S&P 500 analysis shows that the immediate task for buyers is to overcome the resistance level of $7,574. Doing so would confirm further upside and open the path to $7,607. Maintaining control above $7,639 would further cement buyers' positions. On the downside, buyers need to defend the $7,547 area. A break below that level would likely push the index back to $7,518 and open the way to $7,494.
