Stocks closed higher yesterday with all of the major indexes closing up by more than 1%. The Small-cap Russell 2000 gained the most with 2.29%.

Before the open yesterday, futures were off by roughly -1% on threats that the U.S. would begin bombing Iran's power plants if they didn't open the Strait of Hormuz by Monday evening, which in turn prompted Iran to issue its own threats of targeting U.S. and Israeli infrastructure in the region.

But stocks rebounded sharply after President Trump said he would postpone bombing Iran's power plants for 5 days, following "very good and productive" talks.

Those gains carried over into the regular session. But they came off their highs after Iran said that no talks were had. But the President dismissed those denials saying, their communication channels were "blown to pieces," and that not everybody in the Iranian government likely knows what everyone else is doing. He went on to say Iran reached out to the White House, and that "they want, very much to make a deal." He said the Strait "will be opened very soon, if this works," "otherwise, we'll just keep bombing" them.

Several indexes shot up by roughly 2.5% at their best, while the Russell was up by more than 4%, before settling with more modest, yet still solid gains, by day's end. Crude oil fell by roughly -10%.

We are entering week four of the U.S./Israel-Iran conflict.

When it began, President Trump suggested it could last 4-6 weeks. And with repeated assertions that the campaign was ahead of schedule, that would mean we are getting closer to winding down.

The Strait of Hormuz situation and Iran lashing out at its neighbors complicated matters. But many of the military's objectives have been met. So, if negotiations go well, we might see an end to hostilities relatively soon.

As I pointed out yesterday, the major indexes had entered either pullback or correction territory (pullbacks are defined as a decline between -5% and -9.99%, and they happen on average of 3-4 times a year, while corrections are defined as a decline between -10% and -19.99%, and they happen on average of about once a year). As painful as they are when going thru them, they are very common. Every bull market has them. But you typically need a catalyst for those to take place, and the Middle East conflict was the backdrop for that.

However, in spite of the conflict, that did not change the underlying supportive fundamentals, which includes a resilient economy, relatively tame inflation (still too high, but the Fed still sees it on a path towards its target rate), expectation for another rate cut this year and next, increased productivity, strong corporate profits with double-digit EPS growth forecast for each of the next four quarters, and, of course, the ongoing AI boom.

So, once the Middle East conflict comes to a close, and oil starts to head lower, the fears of a wider conflict will end along with it, and the market can get back to trading on the fundamentals, which point to not only higher prices, but another double-digit gain.

But again, Middle East headlines will continue to influence the market. Both good and bad.

Yesterday, we saw the relief and power of a good headline.

When this is over, I expect to see a strong rebound, with the market beginning their next leg up.

See you tomorrow,