By Martin Baccardax
U.S. stocks booked one of the biggest single-day gains of the year on Monday, as investors reacted to suggestions of a potential winddown of military action in the Gulf region that could end the war and ultimately reopen the Strait of Hormuz.
The S&P 500, however, remains pegged near the lowest levels in six months, and is down more than 5% from the all-time peak it reached in late January, as investors worry that a lingering conflict will keep oil prices elevated, stoke inflation pressures and weigh on growth prospects in the world's biggest economy.
Nonetheless, Monday's reaction does suggest that investors are primed to respond to news that President Donald Trump is nearing the point where he can declare victory in the four-week long conflict, given that broader economic data remains resilient, corporate earnings forecasts are robust and expanding, and the tech sector trade, powered by the potential of artificial intelligence, remains compelling.
That likely leaves investors to focus on three key market metrics over the coming week, and into the second quarter, in order to determine if Monday's rally is sustainable, or merely a temporary and fleeting reaction to headline risk in a sensitive market.
The first, according to Bryn Talkington, managing partner at Requisite Capital Management, will be the ability to retake the S&P 500's 200-day moving average, a key performance metric used by technical analysts on Wall Street.
The benchmark fell through its 200-day moving average for the first time in more than a year last week, which was pegged at around 6624 points, and remains south of that figure despite the Monday rally.
"We'll see what happens by Friday," she told CNBC. "We can handle being below the 200-day for around 10 days, based on historic data, but we need to get above that, on both the S&P 500 and the Nasdaq, to regain the bull market."
She also noted that 4.5% will remain a key point of focus for the market amid the continuing Treasury bond selloff for benchmark 10-year Treasury note yields. The paper hit an eight-month high of 4.425% in overnight trading, marking an increase of around 45 basis points since the start of the conflict, but retreated to around 4.371% as stock markets rallied.
"As long as we're staying below that, and it dovetails with the 200-day moving average for the S&P 500, we'll be in good shape," she said.
Oil prices will also need to move below the $100 mark, and remain there for some time, in order for broader market angst with respect to inflation pressures and supply chain disruptions to remain in check.
Brent crude futures contracts for June delivery, the global benchmark, closed around 9% lower from last week's close but were still trading just south of $100 a barrel. That's a 40% increase on the month and a near 70% gain since the start of the year.
Brock Weimer, investment strategy analyst at Edward Jones, says both price declines and activity increases in the Strait of Hormuz will be crucial to determine if the change in tone from Washington will have a meaningful impact on crude markets.
"Although this change in rhetoric is an encouraging development, we think the clearest indication of meaningful de-escalation will be whether crude oil flows through the Strait of Hormuz are able to recover, " he said.
"Headlines remain fluid, and market volatility could persist in the days and weeks ahead. Even so, we continue to believe that a healthy economic backdrop creates attractive opportunities across global equity markets," he added.
Write to Martin Baccardax at martin.baccardax@barrons.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
March 24, 2026 02:00 ET (06:00 GMT)
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