Markets Update - 5/5/26
A look at what happened today impacting US equity, Treasury, and selected commodity markets, and what to watch for tomorrow
Quick Summary:
US equity indices opened higher encouraged by a dialing back of conflict in the Mid-East which saw oil prices fall back. Equities would add to their initial gains as the day progressed and the US declared a conclusion to offensive attacks to finish solidly in the green with another closing all-time high for the S&P 500.
It was a heavy day of economic data with March job openings edging lower but hiring jumping the second most on record to the strongest pace since Feb 2024, while quits and layoffs also increased. March new home sales rose more than expected to the strongest pace this year, while the March trade deficit increased less than expected in part due to heaviest export of petroleum products since July 2022. Services PMIs indicated continued growth in April.
After the close AMD, the second largest maker of computer processors, raised its guidance for the current quarter sending shares higher and boosting a semiconductor index further into all-time high territory.
US equity indices opened trading Tuesday higher encouraged by a dialing back of conflict in the Mid-East after Monday’s clashes with both sides characterizing the encounters as defensive in nature indicating no further attacks were planned in part as detailed in the morning update.
During the session the US said offensive operations against Iran are over as it shifts to protecting shipping in the Strait of Hormuz as Secretary of State Marco Rubio told reporters at the White House Tuesday, “Operation Epic Fury is concluded. We achieved the objectives of that operation.”
“The goal here is pretty simple: establish a zone of transit that is protected by a bubble — the United States, both naval and air assets — and then allow ships who want to move, to move through there and get to market, to begin to increase confidence in the ability to do so,” Rubio said. As Rubio spoke though a British monitoring organization reported that a cargo ship in the strait was struck by an unknown projectile.
Meanwhile Iran said talks mediated by Pakistan were making progress, but it also again warned all ships against trying to get through Hormuz without its permission and announced a new protocol for vessels seeking to transit the waterway, requiring ships to receive an official email signaling approval, state-run Press TV reported.
Elsewhere, the above saw crude prices fall back but bond yields maintained Monday’s gains. The dollar was also little changed while gold, copper, and bitcoin futures all rose. US natural gas futures were lower (all covered in the subscriber section with charts).
The market-cap weighted S&P 500 (SPX) was +0.8%, the equal weighted S&P 500 index (SPXEW) +0.8%, Nasdaq Composite +1.0% (and the top 100 Nasdaq stocks (NDX) +1.3%, the SOX semiconductor index +4.3% (to a new all-time high), and the Russell 2000 (RUT) +1.8%.
Some market commentary:
“Our base-case for markets and the economy has been that there will be a near-term resolution between the US and Iran, allowing for energy prices to fall after the Strait of Hormuz is reopened,” said Chris Senyek at Wolfe Research.
“Many investors are trying to read the tea leaves on the next shoe to drop with the Iran war and oil prices, but stocks have historically moved on quickly from geopolitical events, and we believe this current issue is no different,” said Julian Koski at New Age Alpha.
“The ‘teflon market’ has proved resilient despite lingering concerns, driven by strong corporate profits,” notes Truist Chief Investment Officer Keith Lerner. “S&P 500 forward earnings estimates are up 11% year-to-date, one of the strongest upward revisions in recent decades.”
“We’ve seen just incredible earnings from not just the megacap tech but also the broad-based S&P 500, or even the small-cap indices within the U.S.,” said Zachary Hill, head of portfolio management at Horizon Investments. When you couple that with the market’s belief that both the U.S. and Iran “want some sort of resolution to this conflict,” that explains why the market is trading at all-time high levels, Hill continued. “The market is largely over the Strait of Hormuz situation,” he said. “I think it would take a material change in the facts on the ground or a really large spike in the price of oil for the market to get re-engaged with the back and forth of that conflict.”
“Earnings remain the fuel for the US rally,” Madison Faller, global strategist at JPMorgan Private Bank, told Bloomberg TV. “The next question is whether earnings strength can broaden beyond technology. Portfolios need more than just one sector carrying the market.”
“Global market sentiment has made a cautious start of the week, with renewed attacks in the Gulf casting doubt on the state of the four-week-old ceasefire between the US and Iran as both the sides look to exert influence over the Strait of Hormuz,” Deutsche Bank strategist Jim Reid wrote in a Tuesday note.
“US stocks continue to be intensely relaxed about the ongoing tensions in the Middle East. But under the surface of the stock market, there is unease. The number of stocks making new 52-week lows in the S&P is rising. This is typically not a good sign.” — Simon White, macro strategist.
“Project Freedom is a way for the US to gain an upper hand in negotiations,” wrote Mohit Kumar, chief economist and strategist for Europe at Jefferies. “In the coming days, it would become clear whether the US can provide safe passage to the ships and hence can take a much tougher stance.”
