Situation Awareness
Situation Awareness: Cautious. Renewed geopolitical tensions are driving the market narrative, with equity futures sinking after failed U.S.-Iran talks and subsequent threats of a blockade. Markets are bracing for Q1 earnings season amidst uncertainty. Trade mode: selective and defensive. Heightened tensions in the Middle East are overshadowing upcoming earnings releases. Regime context — 41% of stocks trade above their 20-day SMA, and the 4% Bull/Bear gauge shows 0 bulls vs. 0 bears. The 5-day trend shows a recovery after a ceasefire agreement earlier during the week, but tensions have re-escalated.
SIP: REPL IDYA GS FAST
- What’s working: Despite the overall negative sentiment, positive data from trials and acquisition announcements have led to some stocks moving in the Healthcare and Consumer sectors, with smaller-cap outperformers.
- Leading sectors: Energy (1.19) due to the rise in oil prices. Sector Volatility: Technology (1.37), Financials (0.44) both uptrending with rising volatility.
- Geopolitical: President Trump’s threat of a U.S. Navy blockade on the Strait of Hormuz has sent crude oil up $7.43 (+7.7%) to $104.00 per barrel.
- Market read: Last week’s gains, driven by a temporary ceasefire and AI optimism, are being unwound as geopolitical concerns resurface, shifting focus back to risk management given the heightened uncertainty.
- DEP watchlist: CRWG MRVL NBIS
- SIPS: AVGO COHR CRDO
Today’s Market Narrative
U.S. equity futures are pointing to a lower open this morning, reversing last week’s gains, which were fueled by a ceasefire announcement between the U.S. and Iran. The optimism was short-lived, as talks between the two nations failed over the weekend, reigniting fears of a prolonged conflict and sending oil prices soaring. This geopolitical uncertainty is weighing heavily on market sentiment, overshadowing the start of Q1 earnings season, which is set to kick off this week with major banks reporting.
Asia-Pacific markets also experienced a mostly negative session, reflecting the renewed concerns surrounding the U.S.-Iran conflict. European indices are trading lower across the board, further solidifying the risk-off sentiment. Crude oil climbing back above $100/bbl is pressuring sentiment, as high energy prices are expected to persist, impacting economic growth.
This shift in market dynamics underscores the fragility of the recent rally and the market’s sensitivity to geopolitical developments. The focus now shifts to how companies address the impact of the conflict on their earnings during the upcoming reporting season and what strategies they are implementing to mitigate risks.
Macro & Policy
The failure of peace talks between the U.S. and Iran has significantly impacted the bond market, as renewed concerns over the conflict’s path have pressured U.S. Treasury futures. Overnight, yields on JGBs of most tenors hit fresh cycle highs. President Trump’s announcement of a potential U.S. Navy blockade on Iran’s ports is adding further fuel to the fire, with crude oil climbing back above $103/bbl and the U.S. Dollar Index up 0.3% at 98.95. The 10-Yr Treasury yield is currently at 4.35%. This increasing geopolitical pressure is influencing investor appetite for risk, leading to a flight to safety and impacting treasury performance.
Economic Calendar Today
- 10:00 ET: March Existing Home Sales — Expected: 4.01 million | Prior: 4.09 million — The data release may provide insights into the housing market’s strength amidst rising geopolitical tensions.
- Earnings reporting today (pre-market): FAST, GS
If no major calendar events, the impact is expected to be low.
Earnings & Corporate News
Goldman Sachs (GS) beat EPS expectations by $1.08 and beat revenue expectations, however, GS declines in premarket trading. Fastenal (FAST) reported EPS and revenues in-line, and is also trading lower. Best Buy (BBY) is trading lower in the premarket after Goldman Sachs downgraded the stock to Sell from Buy with a target of $59. In M&A news, Leggett & Platt (LEG) to be acquired by Somnigroup International (SGI) in an all-stock transaction valued at approximately $2.5 billion; a deal that boosts LEG shares in pre-market. However Replimune (REPL) experiences broad downgrades and a complete response letter from the FDA.
WaveFinder Signal Summary
The WaveFinder scans reflect the risk-off sentiment, with continuation signals remaining muted and more stocks above their short-term moving averages losing ground. The decline in REPL is likely influencing sentiment in the Healthcare sector in general.
Today’s Watchlist
- USO — Rising crude oil prices on renewed conflicts, looking for continuation signals as it gaps up.
- GS — Q1 earnings beat, watching open to see if market follows upgrade sentiment.
- IDYA — Positive trial topline results present an opportunity for long setups, will watch for dip buying opportunities.
- REPL — Multiple downgrades after pipeline setback, fade strength into weakness.
- AVGO — The stock showed a 4.7% change with high RVOL, signalling it may be a stock for a 2LYNCH pattern.
- COHR — The stock displayed a 8.2% change with high RVOL, signalling it may be a stock for a 2LYNCH pattern.
Action Codes of the Day
- CRT Controlled Risk Taking — Given the rise in geopolitical uncertainty and the start of earnings season, implementing controlled risk measures is prudent to navigate the volatile market.
- FHP First Hour Pass — Waiting for the market to establish a clear direction in the first hour is critical before committing to any trades, given the volatile environment.