Yesterday markets celebrated Cinco de Mayo with a rally recouping Monday’s loss and then some as US military leadership said Monday’s Iran attacks were below the threshold of restarting major combat operations. The S&P 500 closed at a new all-time high up 0.8% while small and midcap indices were up ~1.5%. Semiconductors continued to lead to the upside with the NSYE Semi index up >4% bringing YTD gains to 60%, spoiler alert they are up sharply again this morning. Oil prices and Treasury yields both moved modestly lower.

It has been a wildly volatile overnight session as we’ve had a ton of Iran headlines. Apologies in advance for the blow by blow but have been putting this together as we go. Last night futures started to move higher after President Trump said Project Freedom would be paused as “Great Progress has been made toward a Complete and Final Agreement with the Representatives of Iran”. The gains were pretty muted until just before 5am this morning when Axios, which has lived up to the first two letters of its name during this conflict, broke a story that the US/Iran were close to a one-page memorandum of understanding to end the war and set a framework for more detailed Nuclear negotiations. About an hour later the IRGC Navy also chimed in with some positive comments saying with the end of 'threats from aggressors' and in light of new procedures, safe and stable transit through the strait will be possible “. This helped to push futures to session highs and oil to session lows. However, since President Trump tempered some of the enthusiasm once again warning that there is a big stick if an agreement can’t be reached and telling the NY Post that it was “too soon” to start thinking about face-to-face talks. Right around the same time an Iranian official noted that the Axios text is just America’s wish list. Coming full circle (hopefully this is it) Axios has chimed in again noting that the US expects a response withing 48 hours on several key points. S&P futures are holding the bulk of the overnight gains but are about 25pts off the highs currently up 0.7% while R2K futures are up ~1%. Oil prices are down ~6% with ICE Brent currently trading ~$103.50 (LOD $96.75). Outside of the Iran headlines there have also been another strong round of earnings and a couple of AI related partnership/deal announcements helping to drive the upside.