|
|
- A ceasefire triggered a broad market rally and a sharp decline in oil last week; investors remain focused on the durability of both the agreement and improving sentiment.
- Inflation remained stable last week, supporting expectations that the Federal Reserve will maintain a patient approach to interest rate cuts.
- Labor market data released last week showed resilient hiring and limited layoffs, supporting expectations for continued stability despite slower job growth.
1. Ceasefire Drives Risk Appetite and Oil Volatility
Markets moved sharply higher last Wednesday, and ended the week up, after the U.S. and Iran agreed to a two-week ceasefire tied to reopening the Strait of Hormuz. The announcement came late Tuesday, just hours before a potential escalation deadline, sparking a broad relief rally across global markets. On Wednesday, the S&P 500 Index rose 2.5%, its strongest daily gain in a year, while the Dow Industrial Average advanced 2.9% and the Russell 2000 Index gained 3.0%.1 International equities also moved higher, rising 3.5%.1 Despite the positive reaction, the agreement was quickly tested, as regional tensions persisted and the Strait remained effectively closed heading into the weekend.
Oil prices responded even more dramatically than stocks, falling 16% on Wednesday in their largest one-day decline since 2020.1 The drop eased inflation expectations and lifted sectors sensitive to fuel costs, though prices rebounded as the Strait reopening remained in question. At the same time, credit spreads tightened and volatility declined, signaling improved investor confidence.1 Treasury yields, however, moved only modestly lower, suggesting bond markets are waiting for clearer signs that inflation risks are easing.1
Taken together, last week’s moves reflect improving sentiment, but markets remain focused on whether geopolitical developments will translate into sustained economic relief.
2. Inflation Holds Steady While Policy Patience Continues
The Personal Consumption Expenditures (PCE) Price Index, the Fed’s preferred inflation measure, came in largely as expected last week, suggesting price pressures remain elevated but stable. Headline PCE inflation held at an annualized 2.8% in February.2 A modest increase in goods inflation, which rose to 1.8% year over year, was offset by continued improvement in services inflation.22 Services prices slowed to 3.3%, marking the lowest level in five years and helping moderate overall inflation trends.2
Core PCE, which excludes food and energy prices, edged down to 3.0%.22 While this represents an incremental improvement, it remains above the Federal Reserve’s 2% inflation target, reinforcing the need for caution.
Looking ahead, inflation may temporarily move higher as recent increases in oil prices begin to filter through the economy. With labor market conditions stabilizing and inflation risks still present, policymakers appear likely to maintain their pause on rate cuts. This patient stance should provide the time needed to determine whether recent inflation pressures prove temporary or more persistent.
3. Labor Market Shows Stability Despite Modest Cooling
Labor market data released last week pointed to continued stability, even as hiring slowed from the strong pace seen in recent years. Initial jobless claims rose modestly to 219,000, slightly above expectations.3 However, continuing claims fell more than anticipated to 1.79 million, suggesting that unemployed workers are still finding jobs at a steady pace.3 Together, these figures reinforced the view that layoffs remain limited and the labor market is stabilizing rather than weakening. Slower hiring, alongside moderate layoffs, should help keep wage growth modestly above inflation, though rising energy costs could put additional pressure on real wage gains.
Last Friday’s March employment report provided further evidence of resilience. Nonfarm payrolls increased by 178,000, well above expectations for a 60,000 gain.4 Job growth was broad-based, with manufacturing and construction posting gains alongside continued strength in service sectors such as health care. The unemployment rate also declined to 4.3%, underscoring continued labor market strength.4
For the period ending 4/10/26.
* Small-cap stocks are represented by the Russell 2000® Index. International stocks are represented by the MSCI EAFE. Bonds are represented by the Bloomberg US Aggregate Bond Index. Oil is represented by WTI Oil (West Texas Intermediate Oil), a benchmark for light, sweet crude oil and a primary measure for pricing oil contracts and futures in the U.S.
Sources
1 FactSet
2 U.S. Bureau of Economic Analysis (BEA)
3 U.S. Department of Labor
4 U.S. Bureau of Labor Statistics
Disclosures
Cary Street Partners is the trade name used by Cary Street Partners LLC, Member FINRA/SIPC; Cary Street Partners Investment Advisory LLC and Cary Street Partners Asset Management LLC, registered investment advisers. Registration does not imply a certain level of skill or training.
Any opinions expressed here are those of the authors, and such statements or opinions do not necessarily represent the opinions of Cary Street Partners. These are statements of judgment as of a certain date and are subject to future change without notice. Future predictions are subject to certain risks and uncertainties, which could cause actual results to differ from those currently anticipated or projected.
These materials are furnished for informational and illustrative purposes only, to provide investors with an update on financial market conditions. The description of certain aspects of the market herein is a condensed summary only. Materials have been compiled from sources believed to be reliable; however, Cary Street Partners does not guarantee the accuracy or completeness of the information presented. Such information is not intended to be complete or to constitute all the information necessary to evaluate adequately the consequences of investing in any securities, financial instruments, or strategies described herein.
Cary Street Partners and its affiliates are broker-dealers and registered investment advisers and do not provide tax or legal advice; no one should act upon any tax or legal information contained herein without consulting a tax professional or an attorney.
We undertake no duty or obligation to publicly update or revise the information contained in these materials. In addition, information related to past performance, while helpful as an evaluative tool, is not necessarily indicative of future results, the achievement of which cannot be assured. You should not view the past performance of securities, or information about the market, as indicative of future results.
A Composite PMI is a single index that tracks economic activity by combining the performance of both the manufacturing and services sectors, providing a comprehensive overview of overall business conditions.
Nothing contained herein should be considered a solicitation to purchase or sell any specific securities or investment-related services. It should not be assumed that any of the securities transactions or holdings discussed were, or will prove to be, profitable.
The Consumer Price Index (CPI) measures the monthly change in prices paid by U.S. consumers. The Bureau of Labor Statistics (BLS) calculates the CPI as a weighted average of prices for a basket of goods and services representative of aggregate U.S. consumer spending. The CPI is a measure of inflation and deflation. The CPI report uses a different survey methodology, price samples, and index weights than the producer price index (PPI).
Additional Disclosures: International and Foreign Securities, Fixed Income Investments, the Consumer Price Index, the Producer Price Index.
Comparative Index Descriptions: The Standard & Poor’s (S&P) 500 Index, The Russell 2000® Index, The NASDAQ Composite Index, The MSCI EAFE Index, Dow Jones Industrial Average® (Dow Jones or DJIA), The Bloomberg Barclays US Aggregate Bond Index (US Agg Bond), The CBOE Volatility Index (VIX). CSP2026001_15
