The Top Line
The economy is growing slowly while the Iran conflict pushed gas prices — and overall inflation — to their highest level in nearly two years. Stocks shrugged it off Monday and fully recovered their war-related losses, but whether that holds depends on what happens with the ceasefire.
We are operating in a transitional/mixed regime defined by near-stall growth colliding with an energy-driven inflation spike. The Atlanta Fed's GDPNow model projects Q1 GDP growth at just +1.3% annualized—well below trend—while March CPI surged to 3.3% YoY on the back of a 10.9% monthly energy price spike triggered by the Iran conflict. The Fed holds at 3.5%–3.75% with markets pricing fewer than 10 basis points of cuts through year-end, effectively boxed in: too much inflation to cut, too little growth to hike. Ceasefire optimism is providing a temporary equity tailwind, but the underlying stagflationary tension is not resolved.
Inflation
Last week's inflation report showed prices rose 3.3% over the past year — the fastest pace since May 2024 — almost entirely because gas prices surged 21% in a single month due to the Iran conflict disrupting oil supplies. Strip out gas and food, and underlying prices rose just 2.6% year-over-year, which was actually a little better than expected. The Federal Reserve — the institution that raises or lowers the cost of borrowing money to control inflation — has said it can largely ignore gas-price spikes as long as the rest of the economy's prices stay calm, and so far they are. Markets expect the Fed to hold interest rates steady at its meeting April 28–29, and almost no one expects a rate cut this year.
Key Takeaway
Gas prices spiked inflation, but the underlying picture is calm — interest rates are staying put for now.
The March CPI report, released Friday April 10th, delivered a bifurcated picture that encapsulates the current macro dilemma. Headline inflation surged to 3.3% YoY—the highest reading since May 2024—driven almost entirely by a 10.9% monthly spike in energy prices as gasoline jumped 21.2%, a direct consequence of the Strait of Hormuz disruption triggered by the Iran conflict. Beneath the headline, the picture was more constructive: core CPI (excluding food and energy) rose just 0.2% MoM and 2.6% YoY, one-tenth of a percentage point below consensus, with services inflation up only 0.2% MoM. Shelter, long the most persistent inflation component, rose 0.3% MoM and 3.0% YoY—its lowest annual reading since August 2021. Six consecutive months of well-behaved 0.2–0.3% monthly core readings have now been punctuated by a single energy-driven shock.
The pipeline risk, however, is real. February PPI came in at +0.7% MoM and +3.4% YoY—well above forecasts—and today's March PPI release (consensus: +1.0% MoM, +4.6% YoY) is expected to show the strongest producer-level inflation since March 2022, with energy accounting for the bulk of the advance. PPI leads CPI by roughly 90 days, meaning the April and May CPI reports will bear the full passthrough of the March energy surge even if crude prices moderate from here. Compounding the picture is the tariff overlay: airline fares, apparel, and shipping surcharges are already reflecting higher fuel costs, and Oxford Economics warns that April CPI will be "uncomfortably strong" given both energy persistence and a statistical quirk from last fall's government shutdown that artificially suppressed prior readings. Capital Economics projects headline CPI to peak near 4% if the ceasefire holds; Goldman Sachs now targets 3.0% for year-end headline and 2.6% core.
The Federal Reserve's preferred gauge—core PCE—printed 3.0% YoY for February, unchanged from January and stubbornly 100 basis points above target. The March PCE report is due April 30th, and the energy-driven March CPI structure suggests it will show similar headline acceleration while core remains more contained. The Fed met in March and penciled in one 25-basis-point cut for 2026 with timing "highly uncertain." Fed funds futures currently price just 8 basis points of easing by year-end. Fed officials have explicitly signaled they can look through the energy-driven headline spike as long as core measures remain anchored, with Raymond James chief economist Eugenio Aleman noting the Fed "is probably not going to react to the noise in the headline measures" absent core acceleration. The April 28–29 FOMC meeting carries a 98.4% probability of no change.
Key Takeaway
The Fed remains on hold, constrained by core PCE at 3.0% and a headline CPI spike it can technically dismiss but cannot ignore politically. The inflation regime is bifurcated: energy is loud, core is quiet. Today's PPI print is the next critical test of whether pipeline pressures are broadening into non-energy categories—the answer materially determines the rate path for the second half of 2026.
Risk and Positioning
The market's fear gauge — called the VIX — sits at about 19, which is still elevated compared to earlier this year but well down from the anxiety of the past six weeks. Stocks have now fully recovered from their war-related losses, partly because investors who had bet against the market rushed to buy back in when the ceasefire news arrived. Gold — which people often buy as protection in uncertain times — has actually been falling, which tells you that high interest rates are making it less attractive to hold assets that pay no income. The most important risk right now is straightforward: if the U.S.-Iran ceasefire breaks down, oil prices would likely surge again and this week's gains could reverse quickly.
Key Takeaway
The mood has shifted from fearful to cautiously optimistic — but that optimism rests entirely on the ceasefire holding.
The dominant market dynamic of the past week has been an aggressive unwinding of the war-risk trade, with the S&P 500 erasing all of its Iran-war-driven losses by Monday's close. At the March 30th trough, the index was down more than 7% for 2026; Monday's +1.02% session pushed it above the 6,878 pre-war level and briefly into positive territory year-to-date. Barclays has described the recovery as partly driven by a "powerful short squeeze" as bearish bets were unwound into the rally, a dynamic that compresses the fundamental signal. The VIX at 19.11 has declined meaningfully from war-peak levels but remains elevated relative to the sub-15 regime of early 2026, reflecting residual uncertainty around the conflict's trajectory. Sentiment has shifted from risk-off to risk-on, but the underlying evidence base is geopolitical optimism rather than improving economic fundamentals.
The cross-asset positioning reveals a critical tension: equities have fully priced a favorable resolution while energy markets have not. WTI crude at approximately $98–99 per barrel—up 2.4% Monday as the U.S. naval blockade of the Strait of Hormuz triggered fresh supply concerns—remains dramatically elevated relative to the pre-war $65 per barrel. Barclays strategists noted this week that "stocks look somewhat more hopeful of a happy ending than oil," and the divergence is material. An equity market that has erased war losses alongside oil prices still 50%+ above pre-war levels creates a structurally fragile positioning if the ceasefire deteriorates. Goldman Sachs reported its second-highest quarterly profit on record Monday but shares fell 2%—a "sell the news" dynamic worth monitoring as JPMorgan, Wells Fargo, and Citigroup report this morning.
Gold's behavior warrants specific attention as a signal of the underlying regime. Having surged from approximately $2,900 to above $5,000 in early 2026—a historic run—gold then crashed to near $4,100 at the worst of the Iran war, a counterintuitive decline explained by surging real yields, forced liquidation from overleveraged positions, and massive ETF outflows from vehicles like SPDR Gold Shares. Gold has partially recovered to $4,740, but it closed Monday slightly lower (-0.20%) even as the DXY weakened 0.33%—a combination that would normally be bullish for the metal. The fact that gold is declining alongside a weaker dollar indicates that real yield dynamics and rate-cut repricing (just 8 bps priced for 2026) continue to dominate the safe-haven narrative. Bloomberg noted that gold reserves have now eclipsed central bank holdings of dollar assets for the first time in decades, representing a structural dollar system stress signal that markets are not yet pricing.
Key Takeaway
Implied volatility at 19.11 is declining as ceasefire optimism dominates, but the equity-energy divergence is the primary positioning risk. Stocks have priced resolution; oil has not. A ceasefire breakdown would simultaneously spike crude, reverse the short-squeeze rally, and validate the risk-off hedges that have been aggressively unwound over the past week.
Sector and Cross-Asset Analysis
Tech companies have been the biggest winners since the market turned around two weeks ago, gaining roughly 13% from their lows as investors rotated back to growth and away from the war trade. Within tech, chipmakers have surged while software companies are still lagging — a split that reflects real differences in who benefits most from AI spending. Oil and gas companies are moving in the opposite direction, down sharply as crude prices pulled back from their war highs, though oil is still meaningfully above where it was before the conflict began. Banks are in focus today: JPMorgan, Wells Fargo, and Citigroup all report their quarterly earnings before the opening bell, and their results — especially what they say about loan demand and the economy — will set the tone for the broader market.
Key Takeaway
Tech is leading the recovery; bank earnings this morning will tell us whether the broader market has real support beneath it.
The sector rotation since the March 30th market low has been sharp and narratively coherent: investors are reconstructing the pre-war bull-market playbook. Technology has surged approximately 13% from those lows—the best sector gain in the market—while energy has fallen approximately 8%, the worst, as ceasefire hopes reduced the oil-supply risk premium. Within technology, the recovery has not been uniform: semiconductors have surged on AI-infrastructure spending optimism, while software continues to lag badly, a split that reflects divergent margin and revenue growth profiles in a potentially slowing demand environment. Oracle's 9%+ Monday session gain, driven by AI platform announcements at its Customer Edge Summit, illustrated the semiconductor and AI-adjacent leadership concentration. The average sector, however, is still trailing the cap-weighted S&P 500 in this recovery, confirming that breadth remains narrow.
The cyclical recovery is real but uneven. Industrials, consumer discretionary, and real estate have all rebounded sharply, but airlines remain a notable laggard: Delta, United, Southwest, and American all fell more than 2% Monday as higher jet fuel costs and weather-related disruptions weighed on the group despite Delta's strong Q1 beat last week. The housing sector is a related casualty—existing home sales in March fell 3.6% MoM to a nine-month low of 3.98 million annualized units, with mortgage rates having peaked at 6.64% in March before easing modestly to approximately 6.40% during the ceasefire period. This is a critical structural data point: the housing market is transmitting the oil price and rate environment into the real economy with a meaningful lag, and residential real estate weakness is not yet reflected in equity market sentiment.
Cross-asset dynamics reflect the de-escalation trade in full force. The yield curve—with the 2-year at 3.776% and the 10-year at 4.293%—shows a 2s10s spread of approximately 52 basis points, a positively-sloped structure that indicates markets are not pricing imminent recession despite GDPNow's Q1 tracking of +1.3%. Yields moved fractionally lower Monday (-2 bps) as risk-on rotation pulled some capital from Treasuries into equities. The dollar at 98.37 has weakened as war-safe-haven demand fades, though Reuters currency strategists surveyed in late March still project the dollar will weaken further as the conflict's safe-haven premium fully erodes. International markets present a mixed picture: Asian equities opened lower Monday on blockade concerns, with the Nikkei -0.72% and Hang Seng -0.71%, suggesting the global growth impact of elevated energy prices is weighing more visibly outside the United States.
Key Takeaway
Market leadership has rotated aggressively from energy and defensives to technology and cyclicals, with tech up ~13% from March lows. Performance remains concentrated in semiconductors and mega-cap AI names; the average sector still lags the S&P 500 in this recovery, and the housing market's deterioration signals that the real economy has not yet escaped the oil-rate transmission. Today's bank earnings are the next meaningful breadth test.
Economic Data & Events
Today's Calendar
- 4:00 AM MT — NFIB Small Business Survey (measures how confident small business owners are feeling about the economy) — Moderate Impact
Previous reading: 98.8 out of 100
- 6:30 AM MT — Producer Price Index, March (measures inflation at the wholesale level — what businesses pay for goods before those costs reach you at the store) — High Impact
Expected: prices up about 1.0% for the month | Previous: +0.7%
- Pre-Market Earnings — JPMorgan, Wells Fargo, Citigroup, BlackRock, Johnson & Johnson — High Impact
The first major bank results of the season; guidance on the economy matters as much as the profit numbers
The 6:30 AM MT inflation report is today's main event. Because energy prices surged so sharply last month, economists expect it to show the biggest jump in wholesale prices since 2022 — which could rattle markets if it comes in even hotter than expected. Bank earnings running alongside it make this a genuinely busy morning: strong results from JPMorgan and Wells Fargo would confirm the economy is holding up; weak guidance on loans or credit quality would raise new concerns.
Key Takeaway
Watch 6:30 AM MT — the inflation report and bank earnings together will set the market's direction for the day.
Today's Calendar
- 4:00 AM MT — NFIB Small Business Optimism (March) — Moderate impact
Consensus: ~97.5 (Iran war impact expected) | Previous: 98.8
- 6:30 AM MT — PPI Final Demand MoM (March) — High impact
Consensus: +1.0% | Previous: +0.7%
- 6:30 AM MT — PPI Final Demand YoY (March) — High impact
Consensus: +4.6% | Previous: +3.4%
- 6:30 AM MT — Core PPI ex-Food & Energy MoM (March) — High impact
Consensus: +0.5% | Previous: +0.5%
- Pre-Market Earnings — JPMorgan (JPM), Wells Fargo (WFC), Citigroup (C), BlackRock (BLK), Johnson & Johnson (JNJ) — High impact
First full read on Q1 bank earnings; guidance on credit quality and loan demand will drive financials broadly
Week Ahead
Today's March PPI is the session's primary macro catalyst, arriving alongside a pivotal bank earnings morning (JPM, WFC, C). Wednesday brings NY Empire State Manufacturing for April and critically, China's Q2 GDP—the first major read on whether the Strait of Hormuz disruption has materially impacted global demand. The FOMC meets April 28–29; any inflation overshoot today sharpens the language risk around an already hawkish hold.
What We're Watching
Monetary Policy
The April 28–29 FOMC meeting is a near-certain hold at 3.5%–3.75%, with markets pricing just 8 bps of cuts for all of 2026. The policy question is not April—it is whether the May 12 CPI and April 30 PCE reports show the energy-driven surge is transitory. Any core PPI acceleration above 0.6% MoM today would push first-cut odds into 2027.
Rates and Fixed Income
The 2s10s curve at ~52 bps is positively sloped but vulnerable. The 10-year at 4.29% has absorbed the ceasefire relief trade; a hot PPI today likely breaks it toward 4.40%+, repricing the terminal rate narrative. We favor intermediate duration (5–7 year) and quality investment-grade credit while avoiding long-duration exposure until the inflation peak is confirmed.
Equities
The S&P has erased all Iran war losses on sentiment and short-covering—not earnings acceleration. Q1 bank results (JPM, WFC, C today; BAC, MS Wednesday) will determine if fundamental support exists beneath the recovery. Narrow leadership in semiconductors and mega-cap AI names remains the primary breadth risk; quality factors and pricing power remain the preferred equity tilts.
Key Risks
The primary tail risk is a ceasefire breakdown that re-spikes oil, re-ignites the inflation narrative, and reverses the aggressive unwind of war-risk hedges. Secondarily, a PPI overshoot today (above +1.2% MoM) combined with weak bank guidance on credit quality could trigger simultaneous pressure on both rates and equities. The 90-day PPI-to-CPI passthrough means April and May prints are structurally at risk regardless of today's result.
The Bottom Line
Today comes down to two things: the wholesale inflation report at 6:30 AM MT and earnings from JPMorgan and Wells Fargo before the open. If both land close to expectations, the stock market's recent recovery should hold — if inflation surprises sharply higher, expect a bumpy day.
Treasuries are consolidating near 4.29% on the 10-year with the 2s10s curve at approximately 52 basis points—positively sloped and signaling the market is not pricing recession despite GDPNow tracking Q1 at a meager +1.3%. Equity internals reflect a powerful but narrow recovery: the S&P is now broadly positive year-to-date while the Nasdaq and Dow remain slightly negative, and the average sector continues to lag the cap-weighted index. The session pivots at 6:30 AM MT on the PPI print; a core reading above +0.7% MoM would challenge the ceasefire-driven rate repricing and likely pressure both bonds and the tech-multiple trade simultaneously. Continued ceasefire diplomacy and in-line PPI should allow the S&P to consolidate in the 6,820–6,920 range, with JPMorgan's guidance on credit conditions and net interest margin the single most important qualitative signal for market tone through the remainder of the week.
Disclosure — AI-Assisted Content & Regulatory Notice
This briefing was drafted with the assistance of artificial intelligence tools. All content has been reviewed and approved by Thomas MacPherson, Investment Adviser Representative (Series 65) and Chief Compliance Officer, River Rose Financial, LLC, prior to publication. AI systems may produce errors, omissions, or outdated information; readers should independently verify data.
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