The drop in energy prices has helped bring down materially. While has risen 20% off the recent lows, the average price for in May was $98.5, $82 in June, and is just getting back to $80 in mid-July. That said, concerns remain that if the flows through the Strait of Hormuz aren’t resumed in the near term, the Strategic Petroleum Reserves levels around the world will drop to levels that will squeeze prices higher.
Interest rates fell on the PPI data, though not as much as they did on the CPI data, which fed expectations of good PPI numbers. The is down 13bps since before inflation data this week. The is down 7bps. Interest rates are still very elevated from earlier in the year, before the Iran conflict began.
But energy prices aren’t slowing the equity markets down much. The is up 10.2% YTD, now only 6 points away from its all-time high. The even-weighted S&P is up 11.4% YTD, 1% from its high. The is up 9.2% YTD, 1% off its high. The is up 17.1% YTD, 4% from its high. The equity market continues to look through near-term consequences of the Iran conflict and stays focused on earnings strength.
Earnings continue to deliver. Yesterday, Goldman Sachs () blew away estimates, with record earnings 47% above estimates, and revenues 26% better than estimates. JP Morgan (), Bank of America (), Wells Fargo (), and Citigroup (C) all had major beats top and bottom, setting a bullish tone to the earnings season.
(IBM) was the big miss on the day, with misses top and bottom and weak guidance, which seems to be losses to AI solutions from its legacy software businesses. Today, we had more solid beats from Morgan Stanley () and BlackRock (). The well above longer-term trends in earnings growth are very encouraging.
Today, despite the uncertainty about what comes next in Iran, all the major indexes are in the green, primarily on earnings strength and much lower prospects of the Fed raising interest rates. Tech remains volatile recently, particularly semiconductors, especially memory, but still leads hugely YTD on the continued strength of AI spending.
The trend is clearly positive, with near-term potential catalysts of a resolution in Iran and longer-term drivers being lower interest rates and margin improvements driven by AI solutions.