No Strait Answers: Fresh Iran Tension Snuffs Rally
Published as of: April 20, 2026, 9:10 a.m. ET
(Monday market open) Friday's exuberance quickly became a case of the Monday blues after Middle East anxiety re-ignited over the weekend. The Strait of Hormuz—which Iran said Friday had re-opened—remains closed this morning as the ceasefire clock winds down and Iran gives mixed signals about joining peace talks, though the latest indications point to its participation. Investors grew cautious, sending stocks down about 0.4% in early trading while crude soared 5% from Friday's one-month depths.
Tensions escalated Sunday after President Trump said the U.S. had fired on and seized an Iranian ship. He also renewed prior threats to hit Iranian power plants and bridges. Iran said it will keep the strait closed so long as the U.S. blockade continues, media reports said, while China today urged a re-opening. The ceasefire ends Wednesday. All this could sap enthusiasm for growth stocks in the tech and discretionary sectors, perhaps giving defensive areas like staples and utilities a boost. Technically, the market looks overbought. The sharp recent rally means technical support is well below the S&P 500 Index's current levels, perhaps near the 50-day moving average just under 6,770. That's a steep drop.
Looking back to Friday, major indexes surged more than 1% to new record highs on news Iran would open the strait, with sectors like discretionary, industrials, and technology leading the charge. The Nasdaq Composite posted its 13th straight higher session, the longest stretch since January 1992, and the S&P 500 Index rose 4.5% for the week. This suggests the market wants to move past its focus on the war. "Investors wasted little time putting money back into risk assets on positive Iran developments," said Nathan Peterson, director of derivatives research and strategy at the Schwab Center for Financial Research, or SCFR, on Friday.
Three things to watch
- Earnings growth estimates narrow, raising concerns: S&P 500 earnings growth in the first quarter is seen at an impressive 13.2%, according to FactSet's updated estimate released Friday. However, that includes expected 45.1% growth for tech, while eight sectors are expected to see quarterly earnings climb less than 4% year over year. Sectors that saw downward moves in earnings estimates last week versus a week earlier, FactSet reported, included industrials, consumer discretionary, health care, and energy. "The latest trends have been to the negative," said Liz Ann Sonders, chief investment strategist at SCFR, in a podcast late last week. "There has been a deterioration in near-term adjustments to earnings. The only sector for first quarter that's seen an increase in estimates has been the tech sector. And that has largely been a function of a small handful of stocks—in particular Micron (MU) and Nvidia (NVDA)—really accounting for a lot of that upgrade. That leaves 10 other sectors, all of which are no better than flat and most of which are down in terms of estimates for the first quarter." Ninety S&P 500 firms report this week including Tesla (TSLA), Intel (INTC), UnitedHealth Group (UNH), American Express (AXP), and GE Aerospace (GE).
- Breadth improves, but rally still looks top-heavy: Market breadth, which surged earlier this month before stalling last week and raising concerns about a narrow rally, improved Friday. The day ended with nearly 60% of S&P 500 stocks trading above their 50-day moving averages, a respectable number historically, though well below peaks near 74% earlier this year. Wider breadth suggests a healthier rally with more participation across sectors, rather than a few big names leading by the force of their market capitalizations. Sonders called current breadth "middling," and noted that despite Friday's all-time S&P 500 high, only 10% of S&P 500 stocks trade at 52-week highs. The S&P 500 Equal Weight Index (SPXEW), which assigns the same weight to all stocks in the index, was up 8% at the close of trade Friday from its March 30 low while the S&P 500 Index, which weighs companies by market capitalization, had risen 12.2% since its low that same day, suggesting that the rally is top-heavy. That makes it more vulnerable to index weakness if some of the mega-caps end up disappointing with their earnings this week and next.
- Rates likely on pause as Fed goes quiet: As of early today, chances of a rate pause at the Fed's meeting this month stood at 99%, according to the CME FedWatch Tool. Odds of at least one rate cut this year are around 40%, down from 50% Friday. Policymakers speaking last week before their pre-meeting "quiet period" appeared to be on the fence, and the 10-year Treasury yield closed at 4.24% Friday, still up year-to-date, before climbing today on new geopolitical tensions. "Rates are likely to remain elevated even if the situation in the Middle East is quickly resolved," said Cooper Howard, director of fixed income research and strategy at SCFR. "We expect the 10-year Treasury to remain range bound in the near-term assuming the war doesn't escalate. Yields have moved up due to concerns that higher oil prices will translate to higher inflation. Even if the situation quickly resolves, it's likely that oil prices will stay higher than they were pre-war, thus supporting higher longer-term yields." The Senate Banking Committee holds a hearing tomorrow on President Trump's nomination of Kevin Warsh for chairman. The appointment is far from a slam dunk, with Sen. Thom Tillis (R-N.C.) threatening to block Warsh's confirmation.
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On the move
- Marvell Technology (MRVL) surged 5.8% after a report in The Information said Marvell is talking with Google about building two new AI chips. Broadcom (AVGO), which recently agreed to produce future versions of Google's AI chips, according to CNBC, fell 1.6% on the news.
- Airline shares fell across the board early Monday due to rising tensions in the Middle East and escalating costs of oil. United Airlines (UAL), which reports tomorrow afternoon, fell 3% and Delta Air Lines (DAL) dropped 2.5%. Cruise line shares also sank, while energy stocks generally rose.
- Strategy (MSTR) lost 2.3% while other crypto-related shares also pulled back as bitcoin (/BTC) dropped almost 3% in early action amid concerns about geopolitical tension and related risk-off sentiment among investors.
- Meta Platforms (META) slipped nearly 1% after Reuters reported the company plans to reduce its workforce by around 8,000 in its initial round of layoffs. It was announced last month that the company planned to lay off roughly 20% of its employees, though timing was unclear.
- Mining shares including Freeport McMoRan (FCX) and Newmont (NEM), both of which report later this week, headed lower early Monday as gold fell and the dollar rose amid escalating tensions with Iran. Silver and copper prices also declined.
- TopBuild (BLD) surged nearly 19% early today on news that it would be acquired by construction supplies distributor QXO (QXO) for $17 billion amid industry consolidation, Reuters reported. The outlet noted that dealmaking is up in the U.S. building products industry due in part to tariff risks.
- Tesla (TSLA) edged lower early Monday, and is the key earnings report to watch this week, with shares recently emerging from an eight-week losing streak.
- Cal-Maine Foods (CALM) dropped 2.5% early today. The Justice Department is preparing to file an antitrust lawsuit against some of the country's biggest egg producers, including Cal-Maine, over allegations "they coordinated pricing through an information service that benchmarks prices for the industry," according to The Wall Street Journal.
- With 10% of S&P 500 companies sharing earnings through Friday, 80% reported a positive EPS surprise and 69% reported a positive revenue surprise, according to Bloomberg.
- March retail sales data due early tomorrow is expected to rise a sharp 1.3% monthly, but that figure is likely to be swollen by the quick advance in gasoline prices. The report doesn't adjust for inflation.
- Technically, the market finished Friday looking near-term overbought, and the S&P 500 Index saw its forward price-to-earnings (P/E) ratio approach 21, not far below early 2026 highs. This means companies reporting earnings may have a high bar to satisfy investors. "A modest 'profit-taking pullback' could occur due to detrimental Iran headlines, or there could be a post-earnings sell-off reaction to some key earnings reports," my colleague Peterson said in his Weekly Trader's Outlook.
- The relative strength index (RSI) for both the S&P 500 Index and the Nasdaq 100 (NDX) finished last week at 73 and 74, respectively. A 70 RSI level is generally considered overbought.
More insights from Schwab
Fresh perspective: Join Schwab's experts as they examine current volatility, the war's impact on rates, the difference between betting and investing, and potential opportunity in infrastructure investments. All this and more in Schwab Market Perspective: Navigating Uncertainty.
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Chart of the day
Data source: CME Group. Chart source: thinkorswim® platform.
Past performance is no guarantee of future results.
For illustrative purposes only.
Friday's dramatic sell-off in crude (/CL—candlesticks) took CME spot futures below their 50-day moving average (blue line) of $84.37, the first time they've traded below this trendline since early January. That moving average served as firm resistance for the last few months of 2025, so it could assume that role again, barring additional geopolitical tension.
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