Good morning and welcome to today's market chronicle. It's Monday, June 15th. The war that was never supposed to happen has ended, which apparently means buying everything and asking questions later.
S&P futures are up 1.3% before the bell, Nasdaq 100 futures climbing 2.1%, and the overnight tone was what professionals call a relief rally and what the rest of us might call applauding the arsonist for eventually showing up with a hose. On Sunday evening, Washington and Tehran announced a peace agreement, ceasefire plus memorandum of understanding, signing ceremony set for June 19 in Switzerland. The Strait of Hormuz, through which roughly a fifth of the world's oil passes and which has been largely closed since the US-Iran conflict escalated earlier this year, will reopen. This, in the wonderful world of finance, is apparently good news. Translation: markets are now pricing in the unwinding of a geopolitical risk premium that would not have existed without the policies of the very administration now taking credit for removing it. But let us not dwell.
WTI crude is trading near $79.40 a barrel, down roughly 5% on the night, its lowest in two months and a long distance from the $119 it touched in March when the market was very confident the Strait would stay closed forever. The 10-year yield sits around 4.42%. Gold holds near $4,339 an ounce, refusing as usual to commit to a direction, neither celebrating the peace nor mourning the lost premium. Bitcoin is back above $65,000, because apparently a deal in the Persian Gulf is also bullish for digital assets. One must admire the consistency.
But everyone is pretending not to notice that the FOMC meets tomorrow and Wednesday for the first rate decision under Kevin Warsh, the new Fed chair. The market prices a 99.6% chance of no change, fine, but the question is whether Warsh signals a bias shift toward tightening that will outlast the Iran headlines by several months.
Ahead today: the Empire State manufacturing survey, some Fed speakers working through Warsh's shadow. Earnings are quiet. The Iran euphoria will set the early tone and markets will largely do what Monday markets do, which is trade the headline and avoid thinking too hard about what Wednesday brings. Consumer sentiment prints later this week, the Hormuz signing happens Friday, and the Fed is between now and all of it. Someone will eventually notice that oil at $79 and a new-ish Fed chair with hawkish instincts is not an obviously bullish combination, but probably not today.
Have a good one.