Talk of Peace in Iran War Stirs Animal Spirits on Wall Street

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The Wall Street Journal got the ball rolling on Tuesday night. Pres. Donald Trump had apparently told those around him that he would be willing to end the U.S. military operation in Iran, even if the Strait of Hormuz remained closed. Some found that disappointing. I thought perhaps the story might have been intentionally disseminated disinformation either to provoke traditional U.S. allies or put the regime in Iran on unsure footing.

Markets found the concept of peace sooner rather than later to be optimistic. What became obvious throughout the day on Wednesday was that there was indeed a real chance for peace in and around Iran and that the U.S. president was unwilling to push this war much further out than the six weeks that he had projected at the onset of hostilities. The Trump administration had originally predicted a six-week campaign and still has a week to go on that timeline.

What some folks fail to understand is that Iran's military has seen its defensive capabilities decimated and its offensive ability rendered far less effective than it had been several weeks ago. Even if the U.S/ halts operations, there are still air and naval bases throughout the region. There are still aircraft carriers and submarines in the region, there are still amphibious and airborne infantry units at the ready and the U.S. Air Force retains the unique ability to accurately launch bombing missions anywhere in the world from Missouri. Those crews never deploy and eat dinner with their families. Iran has been rendered both globally and regionally irrelevant.

Then Things Got Serious

Trying to seize on Pres. Trump's apparent willingness to close offensive operations in Iran sooner rather than later, Iranian Pres. Masoud Pezeshkian reiterated his stance that his nation was ready for this war to end, but needed some guarantees. Bloomberg News reported that Pezeshkian, in a call with Antonio Costa (President of the EU Council), said that Iran expects certain requirements to be met, "especially the essential guarantee to prevent the recurrence of aggression."

Does this mean that Iran is ready to capitulate? Not necessarily, but it does seem to be clear that Iran is looking for a way out of that nation's current predicament. This is what markets celebrated on Tuesday. We are already seeing some shipping get through the Strait of Hormuz un-harassed. That either means that the Iranian military is starting to run out of munitions or that they have been directed to back off of global shipping routes.

From the Oval Office on Tuesday afternoon, Pres. Trump told reporters that the U.S. had successfully eliminated the nuclear threat posed by Iran and that it would "take 15-20 years for them (Iran) to rebuild what we've done to them." The president also said that the U.S. will be leaving Iran in two to three weeks. Pres. Trump will address the nation and update Americans on the progress of this war tonight at 9 p.m. ET.

End of Month / End of Quarter

Wow. We knew that there would be some end of month, end of quarter window dressing given the level of financial damage done throughout the month of March and throughout Q1 2026, but what the possibility of peace in the Middle East did was to violently awaken the market's animal spirits. Bear market rally? Some of the sharpest rallies occur during some of the worst markets, so we'll have to see.

If this is the end of the war, then the bottom, for now, may be in, and we can go back to worrying about how many of us agentic artificial intelligence will put out to pasture, whether or not this recent bout with consumer-level inflation will be sticky, if the Federal Reserve will cut short-term interest rates and if the big, beautiful bill can actually bring about increased economic activity going into the midterm elections.

For the regular session on Tuesday, the Nasdaq Composite took back 3.83% as the S&P 500 gained 2.91%. The Dow Transports rallied for 3.22% as the KBW Banks ran 3.53%. The small- to mid-cap indexes all gained between 2.75% and 3.41%. Oh, and this is the best one, the Philadelphia Semiconductor Index soared an incredible 6.24% in just one session. That group was led by Marvell Technology (MRVL) , which ran 12.8% on the news of Nvidia's (NVDA) $2 billion investment in the company. I covered that story on Tuesday for this publication. ON Semiconductor (ON) , SanDisk (SNDK) , and Arm Holdings (ARM) all also posted gains of better than 10%. Nvidia itself was up 5.6%.

Digging In

Nine of the 11 S&P sector SPDR ETFs closed out the Tuesday session in the green led by Technology (XLK) , the Industrials (XLI) and the Discretionaries (XLY) . Growth and cyclicals clearly outperformed the defensives, though Energy (XLE) for obvious reasons, led the losers for the day. WTI Crude, which traded above $106 per barrel as recently as Monday morning, traded below $97 per barrel overnight.

The U.S. equity market's positive breadth was overwhelming on Tuesday. Winners beat losers by a rough seven-to-two margin at the NYSE and by four-to-one at the Nasdaq. Advancing volume took a commanding 77.4% share of composite NYSE-listed trade and a simply incredible 87.6% share of composite Nasdaq-listed trade.

Aggregate trading volume soared as well, but with some help from end of month / quarter activity. On a day-over-day basis, activity across NYSE-listing increased by 17.2% while activity across Nasdaq-listings popped for a 15.3% gain. Volume across the membership of the S&P 500 landed at its highest level (ex-triple witch) since March 9th. Simply put, the day counts. Put it in the books as a "day one" bullish reversal of trend.

The Chart

After that "two-day" bearish reversal of trend in late February when the war started in Iran, the S&P 500 suffered at least four confirmations or re-conformations of bearish trend by my count. Tuesday presents as a clear-cut "day one" bullish reversal of trend on increased trading volume. U.S. equity index futures are trading higher on Wednesday, but remember, at least technically, we would not at all mind a pause in between any day one and what comes next. A rally today would just blend the two days and still leave the markets needing that pause so that there could be a day that confirms the new trend.

Relative Strength is up and out of technically oversold territory, while the daily moving average convergence divergence remains in need of more positivity to fully adjust its bearish posture. That positivity could start with either a move of the histogram of the nine-day exponential moving average above the zero-bound or a move made by the 12-day exponential moving average above the 26-day EMA. Both would be nice, but we'll be fine dealing with baby steps.

Stairway to Heaven

There's a feeling I get when I look to the West

And my spirit is crying for leaving

In my thoughts I have seen rings of smoke through the trees

And the voices of those who stand looking

Ooh, it makes me wonder

Ooh, really makes me wonder

And it's whispered that soon if we all call the tune

Then the piper will lead us to reason

And a new day will dawn for those who stand long

And the forests will echo with laughter

- Plant, Page (Led Zeppelin), 1971

Economics

(All Times Eastern)

07:00 - MBA 30 Year Mortgage Rate (Weekly): Last 6.43%.

07:00 - MBA Mortgage Applications (Weekly): Last -10.5% w/w.

08:15 - ADP Employment Report (Mar): Expecting 42K, Last 63K.

08:30 - Retail Sales (Feb): Expecting 0.4% m/m, Last -0.2% m/m.

08:30 - Core Retail Sales (Feb): Expecting 0.3% m/m, Last 0.0% m/m.

09:45 - S&P Global Manufacturing PMI (Mar-F): Flashed 52.4.

10:00 - ISM Manufacturing Index (Mar): Expecting 52.3, Last 52.4.

10:00 - Business Inventories (Jan): Expecting 0.2% m/m, Last 0.1% m/m.

10:30 - Oil Inventories (Weekly): Last +6.926M.

10:30 - Gasoline Stocks (Weekly): Last -2.593M.

The Fed

(All Times Eastern)

09:05 - Speaker: St. Louis Fed Pres. Alberto Musalem.

09:13 - Speaker: Reserve Board Gov. Michael Barr.

Today's Earnings Highlights (Consensus EPS Expectations)

Before the Open: (CALM) (.76), (CAG) (.40), (LW) (.61)

At the time of publication, Guilfoyle had no position in any security mentioned.