Markets gain, geopolitical risks return

Summary

Last week

Equities extended their rally for a third consecutive week, with the S&P 500 rising 4.55%. The move reflected a combination of easing geopolitical pressure late in the week and a constructive start to earnings season.

Treasury yields declined, with the 10-year moving toward 4.26%, as investors returned to duration amid a temporary reduction in risk. Oil prices followed a more volatile path. Crude declined late in the week before rebounding over the weekend, as renewed disruptions in the Strait of Hormuz and escalating U.S.-Iran tensions pushed prices higher.

Markets briefly responded to signs of stabilization, including Iran signaling a reopening of the Strait of Hormuz and a temporary Israel-Lebanon ceasefire. Cyclical and travel stocks moved higher in response. That backdrop shifted quickly as tensions re-escalated, bringing renewed focus to potential supply disruptions.

Earnings provided additional support. JPMorgan, Goldman Sachs, and Morgan Stanley exceeded expectations, driven by strong trading activity. Taiwan Semiconductor and ASML reinforced continued momentum in AI-related capital investment. In contrast, several consumer-facing companies signaled softer spending patterns and a more cautious outlook heading into the second quarter.

This week

Markets will be shaped by macroeconomic data, policy developments, and earnings.

Retail sales on Tuesday are expected to rise 1.4%, up from 0.6%. A stronger result would reinforce consumer resilience despite recent energy volatility. A weaker print would suggest geopolitical uncertainty is beginning to weigh on demand.

Jobless claims on Thursday are expected at 210,000, compared with 207,000 previously. Any meaningful increase could heighten recession concerns and drive a move into Treasuries, particularly ahead of the advance estimate for first-quarter GDP on April 30.

Policy risk will also be in focus. The April 21 Senate Banking Committee hearing for Kevin Warsh is expected to draw closer scrutiny. Any tension in the confirmation process could introduce additional uncertainty around the policy outlook and renew questions about the Federal Reserve’s path and independence.

Consumer sentiment data will provide another signal. The University of Michigan reading on April 24 is expected at 48.0, with estimates ranging from 47.6 to 49.8. Sentiment remains near historically low levels, underscoring ongoing caution among consumers.

Earnings remain a central driver. Tesla, Alphabet, and Netflix report this week, alongside expectations for S&P 500 earnings growth of 12.5% in the first quarter. This would mark a sixth consecutive quarter of double-digit growth. Markets will focus on whether AI-driven investment continues to translate into revenue growth and margin expansion.

Geopolitical developments remain a key variable. Markets will continue to track activity in the Strait of Hormuz and the outcome of U.S.-Iran negotiations in Pakistan on April 21. Any progress toward stability, or signs of further escalation, will directly influence market sentiment.