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Good Morning!
Before we jump in, a quick reminder that we have new stock alerts coming next week. Keep an eye on your inbox.
Now let’s break down what actually moved markets this past week and what to watch next.
Market Recap
The biggest story this week was the continued surge in oil prices driven by the ongoing Middle East conflict.
Oil held above $100 and even pushed higher at times as tensions around Iran and the Strait of Hormuz disrupted supply expectations. This has become the single biggest force driving markets right now.
That surge in oil is feeding directly into inflation fears. Higher energy prices impact gasoline, transportation, and overall costs across the economy. As a result, expectations for Federal Reserve rate cuts continue to get pushed further out.
Stocks struggled under this pressure.
By Friday, major indexes closed out another weak week. The S&P 500 and Dow each fell around 2%, while the Nasdaq dropped over 3% for the week. This marks one of the worst stretches for equities in months, with multiple indexes now in correction territory.
Bond yields also moved higher during the week as inflation concerns increased. Rising yields continue to act as a headwind for stocks, especially growth and rate sensitive sectors.
There was some volatility early in the week when news suggested a possible delay in military escalation, which briefly pushed stocks higher and oil lower. However, those gains faded quickly as uncertainty remained.
On the economic side, consumer sentiment dropped to a three month low. Rising gas prices and inflation concerns are starting to impact how consumers feel about the economy.
One notable positive was the Russell 2000. Small caps actually posted a slight gain on the week, showing some resilience despite broader market weakness. Strength in small caps can be a supportive signal for the broader market when it appears.
Overall, markets are being driven by a clear theme right now. Geopolitics is pushing oil higher, oil is driving inflation fears, and those fears are pressuring both stocks and interest rate expectations.
What’s Coming Next Week
Next week will likely be just as event driven.
First, the jobs report will be one of the biggest catalysts. Investors are expecting modest job growth and an unemployment rate around 4.4%. Any surprise here could quickly move markets.
Second, the Middle East situation remains critical. Any escalation or signs of de escalation could cause sharp moves in oil prices, which would immediately impact stocks and bond yields.
Third, bond yields will stay in focus. Yields have already moved higher alongside oil. If they continue rising, stocks could remain under pressure. If they stabilize, markets may attempt a rebound.
Investors will also be watching consumer data closely. With sentiment already weakening, any signs that spending is slowing could shift the outlook for economic growth.
As we head into next week, the market is being driven by one dominant force. Oil and geopolitics. Until that stabilizes, expect continued volatility across stocks, bonds, and commodities.
We will continue monitoring these developments closely and keep you updated with new opportunities as they emerge.
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See you soon!
SmallCapStocks Team
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