Ceasefire Rally Drives Broad Gains Amid Oil Retreat and AI Leadership
Stocks posted strong gains this week as a two-week ceasefire agreement between the U.S. and Iran helped ease geopolitical tensions and triggered a sharp decline in oil prices, fueling a broad-based rally across equities.
The week began cautiously as markets awaited clarity around ceasefire negotiations. Volatility remained elevated early in the week, with oil prices holding above $110 per barrel and stocks trading in a narrow range amid conflicting headlines. However, sentiment shifted decisively midweek after a two-week ceasefire agreement was reached, triggering a sharp $18 decline in oil prices and a broad risk-on rally.
The rally gained momentum as the S&P 500 reclaimed both its 200-day and 50-day moving averages, signaling improving technical conditions. Market participation broadened as all major indices moved higher and most sectors finished the week in positive territory.
Mega-cap growth and AI-related sectors led the advance. Semiconductor stocks were a major driver of performance, with investors continuing to chase AI hardware over software. Cyclical sectors also benefited from falling oil prices and improved sentiment, showing a strong rebound on the week.
By week’s end, momentum remained constructive, with AI-driven leadership and easing geopolitical risks supporting the rally. However, Friday’s CPI report served as a reminder that inflation pressures – particularly tied to energy – remain a key variable for markets moving forward.
The Economy
Economic data released throughout the week presented a mixed but manageable backdrop.
The ISM Non-Manufacturing Index remained in expansion territory at 54.0, though employment slipped into contraction and prices rose sharply, suggesting lingering inflation pressure within the services sector.
Durable goods orders declined 1.4% in February, largely driven by weakness in transportation, while core capital goods orders remained relatively healthy, indicating stable business investment.
Personal income declined 0.1% in February while personal spending rose 0.5%, reflecting continued consumer resilience despite macro uncertainty. Meanwhile, Q4 GDP was revised down slightly to 0.5%, suggesting the economy ended the prior year on a softer footing.
Labor market conditions remained stable, with initial jobless claims holding near historically low levels. However, consumer sentiment weakened notably, with the University of Michigan Consumer Sentiment Index falling to 47.6, reflecting concerns tied to inflation and geopolitical uncertainty.
Friday’s March CPI report showed headline inflation rising 0.9%, above expectations, driven largely by a surge in energy prices. Core CPI rose just 0.2%, indicating that broader inflation pressures remain more contained for now.
The Fed
Treasury yields moved modestly lower for the week as easing geopolitical tensions helped reduce inflation fears. The 10-year Treasury yield ended the week at 4.32%, while the 2-year yield declined slightly to 3.80%.
The Fed remains in a wait-and-see mode, as inflation data continues to present mixed signals. While core inflation remained relatively contained, the sharp rise in energy prices during the early part of the month raised concerns about potential spillover effects into broader inflation.
The PCE price index came in at 0.4% for both headline and core readings, reinforcing the notion that inflation remains sticky but not accelerating dramatically.
Overall, markets continue to expect the Fed to remain cautious, particularly as geopolitical developments and energy prices introduce additional uncertainty into the inflation outlook.
Geopolitics
Geopolitical developments were the primary catalyst for market gains this week. Early in the week, markets were volatile amid conflicting reports regarding ceasefire negotiations between the U.S. and Iran. President Trump set a deadline for negotiations, raising concerns about potential escalation, which kept oil prices elevated and markets cautious.
The turning point came midweek when a two-week ceasefire agreement was reached, prompting a sharp decline in oil prices and a broad relief rally in equities. The agreement also included plans for further diplomatic talks aimed at achieving a more permanent resolution.
Despite the ceasefire, risks remain elevated. Israel continued strikes in Lebanon, drawing criticism from Iran and highlighting the fragility of the agreement. Additionally, tanker traffic through the Strait of Hormuz remained limited, suggesting that supply concerns have not fully dissipated.
Late in the week, markets remained relatively calm ahead of upcoming negotiations led by Vice President Vance. President Trump reiterated that military action could resume if talks fail, underscoring that geopolitical risk remains a key variable for markets.
Company-Specific Commentary
AI and semiconductor-related companies led market gains this week. Semiconductor stocks surged after strong demand signals and earnings optimism, with Taiwan Semiconductor (TSM) reporting upside revenue guidance that lifted the broader chip sector.
Mega-cap technology stocks also performed well. Amazon surged after announcing expanded AI investments and plans to invest $25 billion in data center infrastructure.
Meta Platforms rallied following the launch of its Muse Spark AI initiative and expansion of infrastructure agreements.
AI infrastructure beneficiaries also moved higher, including Corning, Caterpillar, and GE Vernova, all of which reached record highs amid expectations for increased data center spending.
Software stocks lagged, however, as concerns around AI-driven disruption weighed on traditional SaaS names. ServiceNow, Palantir, and Akamai were among the weaker performers.
Health care stocks saw selective strength after favorable Medicare Advantage rate updates lifted managed care companies including UnitedHealth and Humana.
Week Ahead
Markets enter the coming week with improving momentum but continued sensitivity to geopolitical developments. The primary focus will be ongoing U.S. – Iran negotiations, which could determine whether the recent ceasefire evolves into a more durable agreement. Any signs of escalation or breakdown in talks could quickly reverse the recent decline in oil prices and reintroduce volatility.
Investors will also turn their attention to the start of the first quarter earnings season, with major financial institutions expected to report. These results will provide insight into corporate sentiment, loan growth, and capital markets activity following recent volatility.
On the economic front, investors will monitor retail sales, industrial production, and additional inflation-related data for clues on the health of the consumer and broader economy. Treasury market activity and Federal Reserve commentary will also remain in focus, particularly as markets continue to assess the timing of potential rate cuts.
Technically, the market will look to build on this week's gains after reclaiming key moving averages. Continued leadership from AI and semiconductor stocks could support further upside, though the sustainability of the rally will likely depend on stability in oil prices and progress on the geopolitical front.
Overall, while sentiment has improved, markets remain highly headline-driven, suggesting volatility could persist as investors balance improving technical momentum with lingering macro uncertainty.
As always, please reach out to us for any questions and thank you for your trust.
Respectfully,
Michael Neill, CFA
This communication is for informational purposes only and does not constitute an offer to sell or a solicitation of an offer to buy any securities. Any references to specific securities are not recommendations and should not be relied upon as investment advice.