US equities staged a strong rebound on the last trading day of March, although analysts cautioned that the upward move may not justify chasing the market higher.
On Tuesday, the Dow Jones Industrial Average surged by 1,125 points, a gain of 2.49%, buoyed by reports that the Trump administration might seek to de-escalate military tensions with Iran. The Nasdaq Composite jumped 3.83%, while the S&P 500 advanced 2.91%. Technology and communication services sectors led the gains. However, this rally occurred against a backdrop of extreme market volatility throughout March. Brent crude futures recorded a monthly surge of 63.3%, the largest single-month gain since records began in 1988, with international oil prices settling at $118.35 per barrel.
Garrett Melson, Portfolio Strategist at Natixis Investment Managers Solutions, remarked, "I don't believe this rally is one to truly trust." He also noted that month-end and quarter-end periods inherently tend to exhibit amplified market swings. Kevin Gordon, Head of Macro Research and Strategy at Charles Schwab's Center for Financial Research, added, "Today's action perfectly illustrates the current whipsaw market environment—everything can reverse in an instant."
Signs of easing tensions in Iran provided a direct catalyst for the rebound, though uncertainties remain.
According to reports, former President Trump is considering halting military strikes against Iran, even as the Strait of Hormuz remains under Tehran's control. Meanwhile, Iranian President Pezeshkian stated that Iran has the "necessary willingness" to end the war, provided its demands are met, particularly guarantees against further aggression.
However, Gordon pointed out that accurate information regarding the extent of damage to Middle Eastern energy infrastructure remains severely lacking, and future security measures are still unclear. Melson further cautioned that even if Trump manages to find an "exit path" from the conflict, there is no guarantee oil prices will retreat quickly: "We are racing against the 'oil shock clock.'"
Market anxiety has shifted from inflation concerns to growth worries, as reflected in bond market movements.
On Tuesday, the yield on the 10-year US Treasury note fell to 4.310%, down from a 2026 high of 4.439% recorded the previous Friday. Within the roughly $30 trillion Treasury market, capital is shifting from "inflation fears" toward "growth concerns."
Melson observed, "The market is turning the page, moving from worrying about inflation to being more concerned about economic growth." He explained that during the first four weeks following the conflict's outbreak, fears that the Federal Reserve might be forced to raise rates due to inflationary pressures dominated market sentiment. Now, the tangible economic damage from historic oil price spikes has become the central issue. He warned that if gasoline prices remain at $4 per gallon or higher oil prices begin to erode corporate profit margins, Wall Street will have to revise its current wait-and-see stance.
Despite improved valuations, earnings expectations have not yet been downgraded.
Equity markets underwent significant adjustments in March. While the S&P 500 narrowly avoided falling into a technical bear market—defined as a decline of at least 10% from recent highs—the other three major indices touched correction territory during the month. Wells Fargo Securities and JPMorgan recently lowered their year-end price targets for the S&P 500.
According to data from John Butters, Senior Earnings Analyst at FactSet, the 12-month price-to-earnings ratio for the S&P 500 had declined to 19.9 by the end of last week, down from 22 in December, indicating some relief in valuation pressures. Meanwhile, first-quarter earnings growth expectations were slightly raised to 13%, up from 12.8% the previous week, largely driven by improved profit outlooks in the energy sector.
However, Melson noted that the current improvement in valuations assumes that Wall Street has not yet meaningfully lowered earnings expectations—a situation that parallels the Fed's current观望 stance. Should the impact of high oil prices on corporate profits materialize, this assumption will face a significant test.
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