Stocks Rebound as Crude Oil Weakness Knocks Bond Yields Lower

The US stock market is experiencing a rebound today, driven by weakness in crude oil prices. The S&P 500 Index is up 0.40%, the Dow Jones Industrial Average is up 0.13%, and the Nasdaq 100 Index is up 0.94%. E-mini S&P futures are up 0.35% and September E-mini Nasdaq futures are up 0.94%. The decline in crude oil prices has eased inflation expectations, pushing bond yields lower. WTI crude oil is down more than 3% today, while the 10-year T-note yield has dropped to 4.66%.

The US Treasury Secretary Scott Bessent announced a campaign to sever Iran from the global economy, warning that any country doing business with Iran risks facing US sanctions. The focus will be on five of Iran's 'most vital lifelines', including digital assets, technology, gold, aviation, and shipping. Countries will have a defined timeline to shut down economic cooperation with Iran; if they don't, the Treasury will act unilaterally.

Iran's secretary of the Supreme National Security Council responded by stating that any country participating in or supporting America's economic war against the Iranian people would be regarded as an act of war. President Trump has said that the US naval blockade on Iranian ports is putting pressure on the country, and he has no timeline for resolving the US-Iran conflict.

The outlook for strong Q2 earnings is a bullish factor for stocks. The S&P 500 is tracking for earnings growth of almost 32% in Q2, well above projections of +23%, and nearly four times the average earnings growth rate outside of the Covid period since Q4 of 2013. AI spending is expected to account for most of earnings, with AI infrastructure stocks set to contribute nearly 60% of the S&P 500's earnings-per-share growth in Q2.