Last week, trading was once again driven by Iran headline volatility. However, the S&P 500 snapped a 5-week losing as there were signs that the administration was looking for a potential off ramp and hopes for de-escalation. As markets were closed on Friday the BLS Employment report was released and continued a string of volatile readings. On the surface it was a strong report with just under ~180k jobs added to the economy, nearly 3X the estimate, reversing the sharp decline in the previous month - while the unemployment rate also ticked down to 4.3%. However, the underlying metrics within the report were a bit more mixed with gains driven primarily by healthcare/social assistance, a weaker household survey which showed the labor force shrinking by 400k, a decline in average hourly earnings and the length of the workweek. On the surface it was a hawkish report easing some of the concern about the labor market with the prospect of an inflationary impulse on the horizon, with this week’s inflation data expected to start to shed some light on that front.

By the time markets re-opened on Monday that report was old news, once again overshadowed by Iran headlines. Over the weekend President Trump threatened to “obliterate” key infrastructure if a deal wasn’t reached before the impending deadline, which he ultimately pushed back to 8:00 on Tuesday evening. Most global markets were closed for the holiday, but S&P futures were down >0.5% in the overnight session. US equities ended Monday modestly higher amidst reports suggesting last ditch diplomatic efforts. However, it was the lowest volume session of the year - with light attendance and traders largely sitting on their hands given the wide range of potential outcomes. With the time quickly running out on the clock, markets were once again under pressure early on Tuesday. The situation remained fluid as the two-sides continued to exchange bellicose rhetoric. The US hit military targets on Kharg island and Israel struck bridges and railways. However, once again by the end of the day markets had recouped losses with hopes that diplomacy would prevail.