Ceasefire sends stocks higher.

U.S. stocks rallied on Thursday, with the S&P 500 ⁠and ⁠Nasdaq clocking their seventh daily gain, as investors shrugged ⁠off a rise in oil prices and pinned their hopes on the fragile U.S.-Iran ceasefire extending to Israel and Lebanon ​too.

In my column today I look beyond the market euphoria uncorked by Tuesday’s announcement of the ceasefire, and outline why the economic, policy and geopolitical backdrop is still pretty sobering for ‌investors.

If you have more time to read, here are ‌a few articles I recommend to help you make sense of what happened in markets today.

Figures on Friday are expected to show annual headline U.S. CPI inflation last month was 3.3%, up sharply from ​2.4% in February. That would be the highest in ⁠nearly two years. Core goods prices are running hot, and with oil 65% more expensive than it was a year ago, inflation hitting 4% is more likely than the Fed’s 2% target.

Some of the early March survey data suggest the economy remains pretty resilient. But incoming hard data isn’t that robust, and the Atlanta Fed’s GDPNow Q1 GDP estimate is now down to 1.3%. Plus, Q4 GDP was revised down on Thursday to 0.5%. Not great.

* AI disruption fears

U.S. software stocks tumbled on Thursday after Anthropic held back the wide release ⁠of a powerful AI model over concerns it could expose hidden cybersecurity vulnerabilities. Software stocks are down 25% this year, against a ⁠4% decline for the wider tech sector.

Meanwhile, IMF Managing Director Kristalina Georgieva said Fund research shows AI could boost productivity by up to 0.8%, but also affect 60% of all jobs in developed economies. That is sobering, to put it mildly.

The Q1 U.S. reporting season kicks into gear next week, and the outlook is pretty rosy. The LSEG I/B/E/S consensus is for a 14.4% rise in earnings, again led by tech - income is expected to rise 46%, and if consensus forecasts are met, that would mean tech accounting for 75% of the overall rise in dollar income.

A lot of optimism is built into these forecasts. The Nasdaq is back above its pre-war level, and on Thursday clocked its seventh straight rise, a run not seen since August 2024. But remember, tech’s valuation premium over the broader market has collapsed to a 7-year low. So maybe the bullishness is justified?

What could move markets ⁠tomorrow?

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U.S. Treasury yield forecasts are only a bit ⁠higher ⁠than a month ago despite the U.S.-Israeli war ⁠on Iran, according to market strategists polled by Reuters who are still putting off making major changes ​to their longer-term inflation view.

A near-65% peak surge in oil prices since the war started - currently still 36% higher - has stoked fears of a renewed inflation spike ‌and wiped out expectations of Federal Reserve rate ‌cuts this year.

Treasury yields have whipsawed sharply over the past month with each turn in the conflict. The benchmark 10-year yield traded in a 56-basis-point ⁠range in March, ⁠the widest since April 2025, when U.S. President Donald Trump first announced sweeping tariff plans.

Markets are ​now trading Trump’s ceasefire announcement tied to the reopening of the Strait of Hormuz, though renewed hostilities elsewhere in the region have raised doubts about its durability.