The equity market appears to have weathered the Middle East conflict, with the major indices returning to pre-conflict levels, underscoring the underlying resilience. The major stock index futures held firm up early Thursday amid rising hopes of a peaceful solution to the U.S.-Iran war.
Technology stocks, which have led the recovery during the current bull run, continue to outperform. The tech-heavy Nasdaq 100 Index has advanced for 12 straight sessions, its longest streak since 2009, and remains poised to advance yet again on Friday. At last check, the Nasdaq 100 futures contract (NQ) tied to the index was up 0.16%.
Upside Drivers: U.S. President Donald Trump announced Thursday that Prime Ministers of Lebanon and Israel, Joseph Aoun and Benjamin Netanyahu, have agreed for a ceasefire that would go into effect by 5 p.m. ET on Thursday.
Earlier peace efforts between the U.S. and Iran, facilitated by Islamabad, had stalled over the exclusion of Lebanon from a broader two-week conditional ceasefire reached on April 8.
Speaking to reporters on Thursday, Trump said the two-week ceasefire could be extended, if need be, but believed that that wouldn’t be necessary. He also signaled that a second round of talks between the two sides could take place soon.
Meanwhile, first-quarter earnings season has begun on a mixed note. While initial results have been broadly supportive, investor sentiment was dented by weak forward guidance from Netflix, with the stock falling over 10% in premarket trading.
What Strategists Say: Reactions of strategists to the equity market’s record climb has been mixed. LPL Head of Macro Strategy Kristian Kerr said the underlying market action remains largely driven by positioning and risk management dynamics. Pointing to the notably light trading volume, which is running below its year-to-date average for each of the past five sessions, Kerr said the move higher is being propelled more by short covering and forced positioning adjustments than by fresh capital being put to work.
Outperformance of the Magnificent 7 stocks, according to the strategist, in large part due to a need for beta exposure and optimism heading into earnings. “All in all the rally still remains mostly mechanical in nature with further evidence needed to signal a more reliable shift in investor sentiment,” he said.
LPL’s Chief Technical Strategist Adam Turnquist, however, called the rally more durable, citing the improving breadth, strengthening momentum, signs of renewed cyclical leadership, and easing macro headwinds.
Northlight Asset Management Chief Investment Office Chris Zaccarelli said the underlying fundamentals are strong enough to support the bull run. The strategist also sounded a note of caution. “There is a risk that the conflict reignites in the coming weeks, but as long as progress appears to be heading toward a resolution sooner rather than later, traders are buying now and asking questions later.”
How Markets Are Reacting: The E-mini S&P 500 futures contract (ES), which ended Thursday’s session at a record high of 7,077, traded modestly higher in premarket trading. The NQ contract has gained 0.16%.
NQ Futures 1-Year Chart
Source: TradingView
WTI crude oil futures slipped below the $90-a-barrel mark, while the safe-haven U.S. dollar came under pressure amid signs of potential de-escalation. The greenback weakened against all major peers, with notable losses against commodity-linked currencies such as the Australian and Canadian dollars, as well as the euro.
U.S. Dollar Index futures also fell below the 98 level in early New York trading.
Market sentiment in Friday’s session is likely to be driven by scheduled Federal Reserve speeches and developments surrounding Iran.
Read Next: US to Resume Combat With Iran if No Deal Is Reached, Says Hegseth, as Oil Markets Hold Nerve
