Technical Tailwinds Drive Stocks to New Highs

It was another strong week for US stocks with the S&P 500 and Nasdaq both up at least 3% for the third consecutive week. This strong rally pushed stocks to new record highs, with the S&P 500 finishing the week 1.8% over the previous high January 28.

Big tech led last week’s rally with Tesla and Microsoft leading the way, both up over 14%. The Nasdaq was the best performing major index, rising 6.84%. To help put the rally in perspective, the Nasdaq is up 13 straight days, the longest streak since 1992 and the fifth longest streak on record, rising 17.7% over this period, making it the biggest gain than any of the longer streaks, according to FactSet.

Like the last two weeks, equity positioning is expected to be a tailwind. Goldman Sachs noted that Commodity Trading Advisors (CTAs) – dominant players in the markets who are professional money managers that use mostly systematic and/or rules based strategies – bought over $86 billion in equities the past two weeks, one of the top five highest paces on record (helping drive the recent rally). Rules based strategies CTAs use include algorithms, quantitative models, and trend-following methods, like momentum, which exaggerates market moves to the upside or downside.

Goldman Sachs also noted, these systematic buyers could purchase an additional $70 billion over the next week, with UBS adding on to this that risk based funds (like volatility managed funds) have not been meaningful buyers yet and could add another $185 billion over the next month.

Outside of the technical factors mentioned, many are claiming the recent rally is a result of both expectations for a durable ceasefire and systematic strategy re-risking. As FactSet puts it, last week also delivered more support for the solid macro backdrop and consumer resilience themes, a flurry of upbeat AI demand and investment headlines, a big bounce in software and private credit (the two biggest areas of scrutiny in the market) and a continued pickup in high-profile M&A headlines.

Deescalating tensions around the Iran conflict was a contributing factor after the week started with the US stating a second round of talks would take place soon and Israel and Lebanon agreeing to a ceasefire. The situation remains fluid and it is still unclear how this is resolved, but markets are optimistic there will be a solution soon and the impacts to the economy will be minimal.

The start of earnings season, with the usual large banks like JPMorgan, Citigroup, and Wells Fargo, among others, reporting, and it was nothing extraordinary however results were solid and management commentary was even better. Management teams voiced no concern on employment, consumer spending, or credit, but did talk about the resilience of the consumer in the face of the Iran war, risks from AI, inflation, and private credit worries.

The three banks earned a combined $27.53 billion in the quarter, a 17% increase from a year earlier. Strength was seen in trading, as banks earned more from higher volatility in the quarter, and investment banking as there was more dealmaking. At the same time, delinquency rates on consumer loans were lower than last year with some of the banks releasing reserves set aside for bad loans, a sign of a healthier consumer balance sheets.

However, there were comments that it will take time for the full impact of higher gas prices to play out. Wells Fargo CEO noted the bank has seen consumers spend between 25% and 30% more on gas than before the Iran conflict and is seeing “rising stress for the less affluent consumer.” At the same time JPMorgan said consumers were carrying higher balances on credit cards.



The better than expected results pushed earnings growth expectations for the quarter, and full year, higher. The chart below shows how the consensus expectation for earnings growth has changed since the start of the Iran war. Earnings projections typically move lower through the quarter, but earnings revisions this quarter have actually been 3.4% better than what the expectation was March 1. In a typical 6 week period, earnings are revised between 0% and 2% lower, as our chart of the week below shows. 

Earnings move onto a more diversified set of names this week including Tesla and blue chip companies like 3M, IBM, AT&T, Boeing, RTX, Procter & Gamble, and many other.

Other than earnings, this week’s focus will be on the Fed as Fed Chair nominee Kevin Warsh is scheduled to be heard by the Senate Banking Committee in the first step of his confirmation. Due to the Trump administration’s investigation into current Chair Jerome Powell, Senator Thom Tillis (R-NC) said he will block the pick. Investors will look for how Warsh signals his views on monetary policy, including the shrinking of the balance sheet.

Week in Review:

US stocks finished higher for the third straight week, gaining at least 3% each week. The tech sector led the way with a 8% increase, while energy lagged, declining 3.5% as oil fell. The four major indices finished as follows: Nasdaq +6.84%, Russell 2000 +5.56%, S&P 500 +4.54%, and Dow +3.19%. Treasuries rallied with stocks as yields fell across the curve as inflation in March was not as bad as feared. The 2-year Treasury yield fell 10 basis points to 3.71% while the 10-year yield fell 9 basis points to 4.25%. The dollar index fell 0.56%, gold rose 2.01%, while Bitcoin gained 5.68%. As negotiations in Iran progressed and optimism built that the Strait of Hormuz would reopen, oil fell 13.17%.

Recent Economic Data



• Existing Home Sales: The pace of existing home sales in March fell back to near some of the lowest levels in a couple decades. According to the National Association of Realtors, the number of existing home sales was 3.980 million (annualized rate) in March, a 3.6% decline from February and down 1.0% from the pace 12 months earlier. Sales are based on closings, reflecting contracts signed in January and February so the weakness could be weather related (but before the rise in mortgage rates). Inventory remains a constraint on the market with current supply of existing homes at 1.360 million units, up 3.0% in the month and 2.3% from a year ago, however another 300k-500k additional homes are needed to be listed to make it a balanced market. Limited supply has supported prices with the median price up 1.4% from a year ago to $408,800. The rise in prices has helped the average homeowner accumulate $128,100 in housing wealth over the past six years.

• Housing Market Index: The housing market index, an index on homebuilder sentiment, fell to the lowest level since September, near all-time lows at 34 in April which was down four points from March. The index of present sales fell four points to 37, the index on expected sales over the next six months fell seven points to 42, while the index on traffic of perspective buyers fell three points to 22.

• Mortgage Rates: After rising from 5.98% to 6.46% in March, mortgage rates are down for two straight weeks with the average 30-year mortgage rate for a prime borrower down 7 basis points last week to 6.30%. Compared to this time last year, the average 30-year rate is down 53 basis points (or 0.53%).

• Producer Price Index: The producer price index increased 0.5% in March, but not nearly as much as the 1.2% increase expected. Excluding food and energy, the index was up 0.1% in the month, not as high as the 0.5% expected. Prices for final demand goods increased 1.6%, driven by a 8.5% increase in energy prices, while prices for final demand services were flat. Over the past year the index is up 4.0%, accelerating from 3.4% in February, with the core index up 3.8%.

• Empire State Manufacturing Index: The Empire State Manufacturing index was 11.0 for April, higher than the -0.2 from March indicating manufacturing conditions in the New York region improved in the month with activity growing at a moderate pace. The report noted a big jump in new orders and shipments with unfilled orders and delivery times lengthening. It was a stark improvement from March, which may have been impacted from the initial reaction about the Iran conflict. The pace of input prices picked up “sharply”.

• Philly Fed Manufacturing Index: The Philly Fed manufacturing index was a strong 26.7 for April, rising about 6 points from 18.1 in March, also suggesting manufacturing activity picked up in the month. Most the survey’s indicators moved higher and were positive in the month, however the employment index fell and turned negative, suggesting declines in employment. Both price indexes increased, continuing to point to higher prices ahead.

• Industrial Production: Industrial production in March dropped 0.5%, the first decline in four months as Iran-related uncertainty led to a broad decline in activity. Utilities fell 2.3%, mining fell 1.2%, and manufacturing fell 0.1%. However, within manufacturing, the decline was driven by a 3.8% drop in automotive activity, and excluding autos, manufacturing was up 0.2%. Capacity utilization was 75.7%, falling 0.4% in the month.

• Jobless Claims: The number of unemployment claims the week ended April 11 was 207,000, a decline of 11,000 from the week prior, with the four-week average relatively unchanged at 209,750. The number of continuing claims was up 31,000 to 1.818 million, with the four-week average falling 7,000 to the lowest since June 2024 at 1.813 million. 

Company News



• Dell/HP: Shares of PC companies, like Dell and HP, were higher yesterday after a SemiAccurate report said Nvidia has been in negotiations to acquire a “large PC oriented company”, though the report did not identify a target. Nvidia later released a statement it is not engaged in such discussions.

• Lululemon: Shares of Lululemon were lower after Daily Wire reported the company is being investigated by the Texas Attorney General for alleged use of forever chemicals. The company said it phased out the use of forever chemicals in 2023 and is cooperating with the Texas AG’s inquiry and is providing documents.

• Somnigroup/Leggett & Platt: Somnigroup, formed after Tempur-Sealy’s acquisition of Mattress Firm, said it has agreed to purchase Leggett & Platt, manufacturer of various products like bedding, furniture, automotive, and flooring, in an all-stock deal worth $2.5 billion. Leggett & Platt shareholders will receive 0.1455 shares of Somnigroup for each share of Leggett & Platt owned, making them 9% owners of the combined company. Somnigroup said it has watched Leggett & Platt for over five years but had waited because it needed Leggett & Platt to get its manufacturing process in line with current volumes.

• AllBirds (AI): An interesting twist for a shoe brand – Allbirds entered an agreement to sell the Allbirds brand and footwear assets to American Exchange Group. With the announcement it said it will pivot its business to AI computing infrastructure and will change its name to NewBird AI.

• Live Nation: Shares of Live Nation traded lower after Bloomberg reported a New York federal jury found the company illegally monopolized the ticketing market and overcharged fans for tickets to events. This comes after the Justice Department settled with the company several weeks ago, allowing it to keep its Ticketmaster unit. Now, it’s up to the judge to determine how much Live Nation will pay in fines/penalty and whether the company will be forced to break up.

• Spirit Airlines: Bloomberg reported Spirit Airlines could be forced to liquidate its business any day as its turnaround continues to struggle. The company is currently working through its second bankruptcy filing, and expected to emerge from bankruptcy early summer, but is now currently weighing its options as it deals with higher fuel costs and continued negotiations with creditors as it struggles to find a workable deal with lenders. 

Other News



• OPEC Oil Production Down: Production of crude oil in the major Gulf Arab producing nations fell by 7.9 million barrels/day in March to 20.8 million barrels, according to data released by the oil producing group, as the war in Iran starts impacting oil producers. A 7.9% million bbl/day decline is equal to roughly 7.6% of global demand. Iraq saw the biggest hit – its oil production fell 61% to 4.2 million barrels, followed by a 53% drop for Kuwait and 44% drop for the UAE. 

• Tariffs: Treasury Secretary Bessent said after the Supreme Court struck down Trump’s April 2025 tariffs and created a setback to Trump’s tariff policy, tariffs could be back to those levels by July as the administration works on implementing Section 301 studies, which uses a law that allows tariffs on countries with unfair trade practices. Separately, the WSJ reported a US Court of International Trade judge said the administration confirmed they will begin processing claims for tariff refunds starting next week relating to tariffs the Supreme Court ruled illegal.



• Day Trading Requirements Removed: The Securities and Exchange Commission (SEC) approved a FINRA rule change that updates margin rules around requirements to day trade, including eliminating provisions that enforce special margin requirements for frequent day traders. If you made 4 or more day trades in a 5 day period you were labeled a “pattern day trader” (PDT) and needed a minimum of $25,000 in the account or face trading restrictions. The $25,000 requirement and the “PDT” designation are begin eliminated.

• Federal Reserve Chair: Trump said he will not drop the criminal investigation into Fed Chairman Jerome Powell, adding that if Powell does not resign when his term as Chair ends in May he will move to fire him. The Chair has the option to remain on the Fed’s Board of Governors once their term is up. Powell indicated he has no intention of leaving until the investigation is over. The investigation puts Kevin Warsh’s, who is the nominee for the next Fed Chair, confirmation in jeopardy. Senator Thom Tillis, whose vote would be needed, from North Carolina said he will not advance the Fed nomination until the Justice Department ends its probe of Powell. 

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