The headline nobody wanted to see hit overnight: Israel retaliated against Iran for Iran’s drone\/missile strike on Israel. The news everyone was hoping to hear has been spread this morning: Israel’s strike was a “limited” strike that didn’t cause any real damage.<\/p>\n\n\n\n
The connection between these two reports was made in the Treasury market (yields down sharply at first before rebounding), the oil market (up sharply at first before falling), and the equity futures market (sharp pullback before rebounding).<\/p>\n\n\n\n
Notwithstanding the limited response, we wouldn’t say that there is an all-clear signal being sounded by the market, but there is a relief signal being sent that things weren’t worse and that maybe, just maybe, the tit-for-tat strikes will come to an end and a wider regional conflict will be avoided.<\/p>\n\n\n\n
Currently, the 2-yr note yield is down five basis points to 4.97% (after hitting 4.88% overnight) and the 10-yr note yield is down five basis points to 4.60% (after hitting 4.50% overnight). WTI crude futures, which topped $85.00\/bbl overnight, are down 0.7% to $82.15\/bbl. Brent crude futures, which flirted with $91.00\/bbl overnight, are down 0.7% to $86.51\/bbl.<\/p>\n\n\n\n
The S&P 500 futures, which were down as many as 86 points overnight, are up one point and are trading in-line with fair value. The Nasdaq 100 futures are down 27 points and are trading 0.1% below fair value. The Dow Jones Industrial Average futures are down 22 points and are trading fractionally below fair value.<\/p>\n\n\n\n
It has been quite a turnaround that has featured some short-covering activity and a chasing bid to get in on the rebound action.<\/p>\n\n\n\n