Tech Earnings Lift Sentiment

MACRO FRAME

President Trump’s ceasefire extension pivoted sentiment, but the continuation of the blockade – both from Iran and the US, as well as a lack of a timetable for future talks offers uncertainty that potentially caps upside gains.

STOCK INDEX FUTURES

US equity index futures mostly moved higher overnight; strong quarterly results from the tech sector are lifting the Nasdaq and S&P higher. Otherwise, concerns over stalled peace talks prospects between the US and Iran continue to weigh on markets, though a lack of a move higher in oil is supportive to equities. Also supportive to equities is the extension of the Lebanon-Israel ceasefire.

Q1 earnings are running at an 88% beat rate with blended growth tracking toward ~19% YoY , the strongest since Q4 2021, led this week by Intel’s AI-driven blowout. However, forward guidance from some consumer-facing companies looks cloudy: United and American Airlines both slashed 2026 outlooks citing higher energy prices, while IBM and ServiceNow flagged enterprise software weakness.

Yesterday’s PMI data showed the index jumped to a 3-month high of 52.0 in April (from 50.3 in March), with manufacturing ripping to 54.0, its highest since May 2022, and services rebounding to 51.3 from a contractionary 49.8 (S&P Global). The input and output price gauges hit their highest in over a year on energy passthrough.

The VIX is trading at 18.66, down 0.65 points (–3.4%) from Thursday’s close of 19.31, reflecting falling hedging demand as tech earnings fuel a bid in Nasdaq futures and push ES/NQ to fresh 52-week highs. The reading has slipped back into the middle of the moderate 15–20 band, indicating fading tail-risk pricing and arguing against a near-term risk-off posture into the cash open.

The June S&P is trading at 7,172.75, up 0.41% from Thursday’s settlement of 7,143.50, within an overnight range of 7,135.50 to 7,189.50 — a new contract/52-week high. Near-term support is seen at 7,143.50 (prior settlement), then 7,135.50 (overnight low) and the 7,100 round number, with initial resistance at the 7,189.50 overnight/52-week high and the 7,200 round number. SPX cash remains well above its 50-day moving average of 6,777.62 and above the 200-day at 6,702.68.

The June Nasdaq is trading at 27,284.25, up 1.30% from Thursday’s settlement of 26,934.00, within an overnight range of 26,992.00 to 27,363.75 — a new contract/52-week high printed overnight on strong Alphabet/Intel results. Near-term support sits at 26,992.00 (overnight low/open), then 26,934.00 (prior settlement) and the 26,800 round number, with initial resistance at the 27,363.75 overnight/52-week high and the 27,500 round number. NDX cash remains comfortably above its 50-day moving average of 24,879.66 and above the 200-day at 24,689.42.

The June Dow is trading at 49,475, essentially flat (–0.03%) from Thursday’s settlement of 49,490, within an overnight range of 49,257 to 49,598. Near-term support is seen at 49,257 (overnight low), then the 49,000 round number, with initial resistance at 49,598 (overnight high), the 50,000 psychological level, and the 52-week high of 50,937. DJIA cash remains above its 50-day moving average of 47,902.31 and above the 200-day at 47,061.50.

Watch point: Five members of the mag seven report earnings next week, setting up a momentum test for markets amid the Hormuz disruption and likely bringing fundamentals back into price action. However, the US-Iran conflict will continue to dominate overall sentiment.

CURRENCY FUTURES

US DOLLAR: The USD index is 0.18% lower to 98.59 as oil prices eased and positive tech earnings sparked a risk-on rally. The dollar is still set for a weekly gain as persistent uncertainty around the Strait of Hormuz has kept risk sentiment fragile and maintained the dollar’s safe-haven appeal.

Positive developments regarding US-Iran negotiations are likely to put the dollar on the backfoot, while a continuation of the status quo could see the dollar trade sideways until there is further clarity on formal talks between the two countries. Underlying fundamentals make the case for a resumption of the dollar’s downward trend once the US and Iran are officially over. Despite rising inflationary pressures driven by energy prices, the dollar has lost its interest rate differential support it once drew from hawkish Fed expectations, support that has since been repriced away. With the labor market softening materially, the underlying case for a Fed rate cut later in the year remains intact.

Watch point: The dollar continues to find safe haven support and trade in line with oil prices. However, underlying macroeconomic fundamentals make the case for a resumption of the dollar’s downtrend when hostilities are over.

EURO: The euro moved 0.26% higher to $1.17141 as oil prices traded sideways and a tech-driven rally in the equities supported risk-sentiment, bringing the euro higher. On the data front, Germany’s April Ifo survey disappointed across the board, with the Business Climate Index falling to 84.4 (prior 86.3), Current Assessment down to 85.4, and Expectations sliding to 83.3. Next week will bring a policy meeting from the European Central Bank, where it is expected to hold on rates. A Reuters poll of economists found that just over half of respondents expect the bank to raise rates at its June meeting, in line with market-implied odds of a 64% chance of a hike.

The euro is likely to continue trading opposite oil prices. Positive developments out of the US-Iran conflict will be supportive of the currency, while safe-haven demand would see flows to the dollar. Traders are still pricing in rate hikes by the year’s end but ECB President Christine Lagarde said the bank needs more information before drawing firm policy conclusions.

Watch point: A rate hike at the ECB’s April meeting is unlikely, while the case for tightening depends on the effectiveness of the ceasefire and duration of the rise in energy prices.

BRITISH POUND: Sterling is 0.17% higher at $1.3494. Retail sales data for March did little to move the Sterling overnight. The data showed fuel sales leapt by 6.1% from February with much stronger sales than usual in the first few days of the month, reflective of consumers rushing to get gas ahead of major price increases. That dynamic inflated the total retail sales volume in the country. Retail sales volumes across the board rose by 0.7% in March after a fall of 0.6% in February. Excluding fuel sales, volumes were up by 0.2%.

Slowing wage growth remains a key factor which could limit the BoE to one rate hike, against market expectations of two hikes in 2026. The critical watchpoint, however, is whether higher energy costs begin to feed into wage demands. While an April rate hike is unlikely, policymakers will be closely monitoring whether energy price strength is translating into broader wage pressure. Rate-hike timing expectations remain subject to the evolving conflict in Iran, and the situation continues to develop.

Watch point: While an April rate hike is unlikely, policymakers are likely to monitor data on whether higher energy prices are leading to bigger wages demands. We look for GBP/USD to weaken over 1H 2026, though the pound is likely to find near-term support from positive developments out of the Middle East.

JAPANESE YEN: The yen strengthened 0.1% to 159.56 yen per dollar, maintaining the range it has largely traded in over the past week. Inflation data for March showed core inflation rose 1.8% YoY following a 1.6% rise in February.  A separate index excluding the effect of volatile fresh food and fuel, which is closely watched by the BoJ as a better gauge of demand-driven price moves, rose 2.4% in March from a year earlier after a 2.5% gain in February. The war has complicated the BoJ’s rate-hike plan by adding to inflationary pressure, while weighing on an economy heavily reliant on fuel imports from the Middle East. The BoJ is likely to hold off raising interest rates next week. Markets have scaled back timing of a rate hike by the BoJ to September. Still, market-implied odds place a 50% chance of a hike at the June meeting.

The Yen has failed to hold a depreciation past the 160 level, as expectations of government intervention and eventual policy tightening offer support. However, a lack of policy-tightening at the bank’s meeting next week could see the yen routinely test the 160 level. The yen’s near-term trajectory remains hostage to geopolitical developments, a durable ceasefire could quickly unwind oil-driven inflation expectations and reduce urgency for BoJ action, though the bank is set to maintain its tightening bias.

Watch point: While an April rate hike is unlikely, confirmation of a near-term move upwards in policy could bring USD/JPY closer to 155, though geopolitical factors remain the main obstacle to appreciation against the dollar.

AUSTRALIAN DOLLAR: The Aussie is little changed at $0.7133. Having scaled a fresh four-year peak of $0.7222 last Friday, it is set for a weekly drop of 0.5%, with support solid at $0.71. Markets are pricing an 80% chance that the Reserve Bank of Australia will hike rates for a third time this year to 4.35% in May. Focus will center around next week’s first-quarter inflation report due Wednesday. Money markets see rates at 4.6% by the end of the year. Labor data last week showed employment rose in March, while the jobless rate remained low, firming support for a May rate hike. While a durable ceasefire would alleviate downside risks to growth and moderate inflation pressures, ongoing pass-through into broader prices is likely to keep the RBA on a tightening path.

Watch point: The RBA is likely to maintain its tightening bias amid persistent inflationary pressures.

TREASURY FUTURES

Yields are little changed across the curve. Current levels: 3M 3.680% (−0.6 bps), 2Y 3.833% (+0.8 bps), 5Y 3.959% (+0.7 bps), 10Y 4.321% (−0.4 bps), 30Y 4.915% (−0.3 bps). The 2/10 spread stands at 48.70 bps (narrower from 50 bps prior session), the 5/30 spread is at 96 bps (narrower from 97 bps), and the 3M/10Y spread is at 64 bps (uninverted, essentially flat). For the time-being, longer-run inflation expectations are offering resistance to higher yields as the Fed should remain biased towards policy-easing given weakness in the labor market. The spread between one- and two-year inflation swaps remains elevated, signaling that markets continue to expect the effects of higher energy prices to be transitory and should offer underlying support for bond prices, absent a drastic change in US-Iran hostilities. With recent job cut announcements, Challenger’s layoff figures may be getting more attention, though weekly claims data has not shown an uptick in layoff activity so far this year.

Market expectations for Fed easing have been pushed farther out, though are still favorable to a dovish stance from the Fed. Markets are no longer pricing in any cuts for 2026, while seeing nearly a 44% chance for a cut in July 2027. Despite the rising inflationary pressures, we maintain our outlook for a rate cut later in the year, most likely come the fall.

Watch point: Fed policy is poised to stand pat for the time-being, though a path to loosening remains open. Well-anchored inflation expectations should offer resistance to higher yields, while also supporting the case for Fed easing later in the year.

 

 

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