Stocks rebound as Iran signals 'Willingness' to talk, but geopolitical tensions keep markets

Friday was Risk Off and Monday was Risk On…. Stocks closed higher after it was reported that Iran suddenly wants to ‘talk’, that they want to ‘de-escalate’ the conflict between the two countries. Iran – who last week gave the world the middle finger – telling all of us that they would NOT negotiate a nuclear deal, they would NOT stop enriching uranium and that they were still standing by their national interest – calling for the elimination of Israel while chanting ‘death to America’ – suddenly they decided that they changed their mind. This after the Israeli’s smashed them and Trump warned them that should they choose to escalate this conflict – that would be a ‘mistake’.

Yesterday at the G7 – France’s Manny Macron told us that a ‘ceasefire deal was in the works’ and that was quickly debunked by Trump – who said ‘not so fast’.

Over the past 5 days - Israel bombed them to smithereens – doing the world a BIG favor – hitting targets with precision that the Iranians can only dream of - nuclear sites, missile manufacturing sites, testing sites, enriching sites – while taking control of the skies over Iran…. And NOW they want to come to the table…..They are willing to negotiate everything EXCEPT a change of regime – which does not seem possible – but I’ll leave that for another day. I mean how do you negotiate with an oppressive, authoritarian, theocratic regime that favors ideological control of individual freedom, where Sharia law heavily influences policy, law, and society, often overriding secular or democratic processes. They gotta go…. Who is kidding who? But I’ll leave that to Secretary of State Marco Rubio.

When the rumor hit yesterday morning - futures which had been teasing a bit higher – found new life and surged…the bell rang and boom – it was off to the races…stocks surged – the Dow up 317 pts or 0.75%, the S&P up 56 pts or 1%, the Nasdaq ahead by 295 pts or 1.6%, the Russell up 23 pts or 1.1%, the Transports gained 216 pts or 1.5%, the Equal Weighted S&P up 68 pts or 1% while the Mag 7 gained 420 pts or 1.6%.

Oil – which had surged again on Sunday – trading as high as $74.50 – sold off yesterday ending the day at $71.50! This morning oil is up on the idea that Israel will ‘finish the job’ destroying the nuclear site buried deep underground so that Iran can’t even think of having a nuclear bomb…..At 6:50 am – oil is up $1.30 or 1.8% at $73.06.

Gold ended the day at $3417 down $48 and this morning it is churning in place….after trading as low as $3391 and as high as $3422 overnight.

Bonds also ended the day lower – the TLT down 1% while the TLH lost 0.7%…which only makes sense if investors are fearful of higher inflation in the months ahead. The $13 billion of 20 yr bonds that were auctioned off did draw strong demand at the expected yield level of 4.942% - which was an uptick from last month’s auction disappointment. By the end of the day – the 10-yr yield was 4.44% up 4 bps. The 30-year closed up 6 bps at 4.955%.

3 sectors ended the day lower – Utilities down 0.5%, Energy down 0.3% and Healthcare down 0.3%. while Communications, Tech and Financials led the way higher – up 1.7%, 1.6% and 1.15% respectively. Consumer Discretionary gained 1.1%, Basic Materials + 0.8%, Industrials +0.7%, Consumer Staples + 0.3% and Real Estate +0.1%.

And then at 6:30 pm last night – Trump puts out a post on Truth Social advising that ‘Everyone should evacuate Tehran immediately’ – reminding Iran that they should have signed that nuclear deal with the US and futures sell off. This morning US futures are down. Dow -295, S&P’s down 42, The Nasdaq down 165 and the Russell off 20 pts.

Eco data includes Retail Sales m/m of -0.6% (weak), Ex auto and gas of +0.3% (strong), Industrial Production – flat, Capacity Utilization of 77.7% (healthy) and the start of the FOMC meeting. We have not gotten a Goldman Special Report nor a front page article in the WSJ written by Nicky T – so my guess is that there is no change…NO rate cut for you…but we will be entertained by the Dot Plot – to see where the group sees rates in the future.

The dot plot is a graphical representation used by the Federal Reserve to show its members' projections for future interest rates. Each dot represents an individual Federal Open Market Committee (FOMC) member's expectation of the federal funds rate at the end of a specific year or period.

Key points include – it is published quarterly as part of the Summary of Economic Projections (SEP). It is anonymous - Dots are not labeled with specific members' names. It shows the range of rate predictions and the median forecast. And it attempts to guide markets. While it is a tool to communicate the Fed’s outlook, it’s not a binding commitment, as projections can shift with economic changes. So, in my mind – it’s a game really – to give them something to do.

European markets are lower as well….down about 1.5% across the board – this on the back of the heightened state of emergency across the region.

The S&P closed at 6033 – up 56 pts…. taking us back to last week’s high…. This morning futures are suggesting a down day – giving back ‘some’ of yesterday’s gains. Expect this to be the story going forward until this ends – my guess? 3 or 4 more days…

Remember – political chaos causes short term angst – causing some to run for the hills while others choose to take advatage of the moves. Remember – a decline in prices due to geo-political anxiety is an opportunity – mostly because it is emotional. Lower prices are due to investors taking cash off the table not because the ‘thesis’ for investing has changed, thus the opportunity. For now, markets will remain mostly on edge until they lower the temperature in the region – something I do not think happens until Iran is completely neutralized. I think we remain in the 5900/6100 trading range.

Steak pizzaiola

For this you need: 4 thin-cut steaks (sirloin, or flank), olive oil, garlic cloves, minced, onion, finely chopped, 1 (28 oz) can crushed tomatoes (not puree), dried oregano, red pepper flakes (optional, for heat), fresh basil, chopped, s&p, fresh grated Parmegiana (optional, for serving)

Season steaks with s&p. If thick, pound to 1/4-inch thickness for quick cooking.

Heat olive oil in a large skillet over medium-high heat. Sear steaks 2-3 minutes per side until browned. Remove and set aside.

In the same skillet, add oil. Sauté garlic and onion until softened, for about 3 minutes. Add crushed tomatoes, oregano, red pepper flakes, and basil. Season with salt and pepper. Simmer 10-15 minutes until slightly thickened.

Return steaks to the skillet, nestling them in the sauce.

Simmer for 5-10 minutes, until steaks are cooked through and tender.

Serve – spooning sauce over steaks. Sprinkle with Parmesan if desired. Serve with crusty bread and a mixed green salad.