Stocks Rise as Buyers Scoop Up Bargains After Rout

Nancy Lazar, Chief Global Economist at Piper Sandler gives her outlook on the markets and the US economy.

Stocks rose after a rout fueled by concerns over the economic fallout of the war in Iran, with attractive valuations and prospects for resilient corporate earnings luring bargain hunters. Bond yields fell. Oil climbed.

Following a rout that put the S&P 500 on the brink of a technical correction, about 400 of its shares advanced. Treasuries also bounced on hopes the Federal Reserve won’t need to adopt an aggressively hawkish stance to control inflation amid higher energy costs, with 10-year yields dropping the most since early February. US oil topped $100 a barrel.

The war in the Middle East has upended global markets and triggered concern about a simultaneous spike in inflation and slowdown in growth. The conflict - which has entered its fifth week - has severed a crucial route for energy supplies, boosting oil prices and driving stocks toward their worst month since 2022.

There’s growing evidence that the selling that recently hit equities “is getting closer to its ending stages,” said Michael Wilson at Morgan Stanley, who cited the example of previous “growth scares” that were not accompanied by a recession or a rate hike.

“The equity market is less complacent on growth risks than consensus believes,” he noted.

President Donald Trump threatened to destroy Iran’s energy infrastructure if no deal is reached to end the war, while also hailing talks as productive. His comments came a day after he told reporters that Tehran agreed to “most of” the 15-point proposal of ceasefire terms.  Treasuries bounced after a slide fueled by concerns over the economic fallout of the war in Iran, with traders resuming bets on a rate cut in 2026 as Federal Reserve Chair Jerome Powell eased fears about any imminent impacts of higher energy prices on inflation.

The advance in equities drove 10-year yields down the most since early February as Powell said longer-term inflation expectations appear to be in check, with traders erasing wagers on a rate hike. The S&P 500 edged lower as a decline in chipmakers offset gains in most major groups. US oil topped $100.

Jerome Powell.

Inflation expectations seem to be “well anchored beyond the short term,” Powell said Monday during an event at Harvard University. He added that officials may need to respond to the impact from the conflict, but that it’s not the case yet.

“Fed chair Powell’s calm tone along with overdue market focus on the growth risks from higher-for-longer oil are helping to fuel a turn in rates pricing,” said Krishna Guha at Evercore. “The probability of one or more cuts is much higher than the probability of a hike.”

The war in the Middle East has upended global markets and triggered concern about a simultaneous spike in inflation and slowdown in economic growth. The conflict has severed a crucial route for energy supplies, boosting oil prices and driving stocks toward their worst month since 2022.

President Donald Trump threatened to destroy Iran’s energy infrastructure if no deal is reached to end the war, while also hailing talks as productive. His comments came a day after he told reporters that Tehran agreed to “most of” the 15-point proposal of ceasefire terms.

“Until there’s something more concrete on a ceasefire or diplomatic progress, any short-term moves against the prevailing trend should be treated with caution,” said Fawad Razaqzada at Forex.com.

--------

Watch Bloomberg Radio LIVE on YouTube

Weekdays 7am-6pm ET

Follow us on X

Subscribe to our Podcasts:

Bloomberg Daybreak

Bloomberg Surveillance

Bloomberg Intelligence

Balance of Power

Bloomberg Businessweek

Listen on Apple CarPlay and Android Auto with the Bloomberg Business app:

Apple CarPlay

Android Auto

Visit our YouTube channels:

Bloomberg Podcasts

Bloomberg Television

Bloomberg Originals