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Good Morning!
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Now let’s break down what actually moved markets this past week and what to watch next.
Market Recap
This was a week of dramatic swings, and the single biggest driver was the ceasefire announced between the U.S. and Iran on Tuesday evening.
Coming into the week, markets were under serious pressure. Oil had been trading near multi-year highs, inflation fears were building, and investors were bracing for potential escalation in the Middle East conflict that had been rattling markets for weeks. Then mid-week, the ceasefire changed everything. Oil posted its biggest single-day decline since April 2020, while the Dow had its best day in a year, surging over 1,300 points. The S&P 500 and Nasdaq each gained nearly 3%. The relief was felt globally, with major stock markets across Asia and Europe posting some of their best single-day performances in years.
The direct economic impact of the ceasefire was felt most immediately in energy prices. Oil had been the primary source of market stress for weeks, feeding directly into inflation, consumer costs, and Fed policy expectations. The sharp drop in oil following the truce announcement was a meaningful relief valve. Even so, oil remains roughly 50% above where it started the year, meaning the damage to consumers and businesses is already done for now. Relief at the pump will be gradual, not immediate. Analysts also cautioned that the ceasefire is a two-week truce rather than a lasting resolution, with a significant trust deficit on both sides. If it holds, energy prices can continue easing. If it breaks down, oil spikes again and all the pressure returns.
The other major story of the week was Friday's inflation report, which showed just how much damage elevated energy prices have already caused. Consumer prices surged in March, pushing the annual inflation rate to 3.3%, the highest since April 2024, driven almost entirely by the spike in energy costs. The important nuance is that underlying inflation, which strips out food and energy, came in below expectations, suggesting the oil shock has not yet spread deeply into the broader economy. However, analysts cautioned there is a lag between oil prices and core inflation, warning the longer oil stays elevated, the greater the likelihood it eventually filters through to broader prices.
Markets took the inflation data in stride on Friday, with stocks edging higher as investors focused on the tame underlying reading and the post-ceasefire momentum.
For the Federal Reserve, the picture remains complicated. The Fed had penciled in one rate cut for 2026, but many economists have since removed that cut from their forecasts entirely. Until energy prices stabilize durably and inflation shows a clear downward trend, the Fed has little room to ease. Higher for longer remains the base case. By week's end, bond yields pulled back modestly as some of the worst-case inflation fears were tempered, and the S&P 500 rose more than 3% on the week. After five consecutive losing weeks, the market finally found its footing.
What's Coming Next Week
The focus next week shifts to corporate earnings, and it is one of the most important weeks of the season. Major banks report throughout the week, with some of the largest names in finance set to release their first quarter results. Technology, consumer goods, and semiconductor companies also report, making it a broad and important snapshot of how corporate America is holding up.
Analysts forecast this would mark the sixth consecutive quarter of double-digit earnings growth for the S&P 500. Strong results could give the market real momentum coming off this week's relief rally. But guidance will matter just as much as the numbers. Investors will be listening closely to what executives say about energy costs, consumer demand, and the economic outlook for the rest of 2026.
For the big banks specifically, solid investment banking fees are expected thanks to strong deal activity, but elevated oil prices and macro uncertainty are expected to weigh on forward guidance. In a volatile environment like this one, what CEOs say about the road ahead often matters more than the quarterly numbers themselves.
The inflation picture beyond March is also worth watching. Some economists forecast the full impact of elevated energy prices could push headline inflation even higher in April, the first full month fully reflecting war-driven energy costs. That data does not arrive until May, but it will be shaping expectations in the weeks ahead.
Finally, the ceasefire truce itself runs through approximately April 22. Any breakdown could quickly reverse the oil drop and reignite the inflation pressures markets just started to exhale from. Any progress toward something more permanent would be a meaningful positive for stocks, bonds, and consumers alike.
The bottom line: the ceasefire gave markets the relief they needed, but it is fragile. Inflation is real, the Fed is on hold, and earnings season will now tell us how well corporate America is absorbing the pressure.
We will continue monitoring these developments closely and keep you updated with new opportunities as they emerge.
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SmallCapStocks Team
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