The US market: review and forecast for April 17th. Pause after an impressive rally

What we expect

This Friday the market may take a pause after several days of growth that caught off guard investors who feared a prolonged conflict in the Middle East and therefore maintained a large number of defensive positions. The rally of the S&P 500 since early April has largely been driven by the rebound of the “Magnificent Seven” stocks. After reaching a low on March 30, the equal-weighted basket of these stocks has fully recovered its losses, although at one point the drawdown since the beginning of the year reached 16%. After such a rapid rebound, this group will likely need a consolidation pause. The news flow remains mixed. Donald Trump stated that the war with Iran could end soon and that negotiations between the sides might resume this weekend. At the same time, a ten-day ceasefire between Israel and Lebanon has come into effect, which the United States considers part of broader efforts to stabilize the region. However, Washington’s tone remains firm. Trump made it clear that if an agreement is not reached, U.S. forces would be ready to resume strikes. The issue of reopening the Strait of Hormuz remains unresolved and shipping traffic there is still restricted. European countries are discussing practical steps to restore normal maritime traffic along this route after the conflict ends, including mine-clearing operations and convoy escorting.

Against this backdrop, the oil market continues to show elevated volatility and strong sensitivity to news, as price dynamics largely depend on expectations regarding progress in peace negotiations. Any signals of delays in restoring logistics could quickly change the current trend and put pressure on risk assets.

No major macroeconomic releases are scheduled for today. Before the opening of the main trading session, quarterly results will be reported by Truist Financial, Fifth Third Bancorp, Regions Financial, State Street Corporation, Ally Financial and Ericsson.

U.S. equity index futures are trading slightly higher. We assess the risk balance for the upcoming session as neutral with moderate volatility. In our view, catalysts for the continuation of the rally are temporarily absent.

Investors will be waiting for news regarding diplomatic paths toward a sustainable peace with Iran as well as upcoming earnings reports next week from major companies including Tesla, Intel, Procter & Gamble, Lam Research, UnitedHealth Group and IBM.

We expect fluctuations of the S&P 500 in the range of 7000–7080 points. Further market direction will largely depend on the prospects of fully reopening the Strait of Hormuz and the dynamics of oil prices.