Stocks closed mostly lower yesterday, but off their lows, as a late-day bounce took them off their worst levels. The Dow was the only one that eked out a small gain of 0.11%.

The Dow, which had joined the Nasdaq in correction territory on Friday, after declining -10.01% from their all-time high close, exited correction territory on Monday and is now 'just' in pullback territory with a decline of -9.91%. Although, the difference is pretty miniscule. But for those keeping track, technically, there's a difference. The small-cap Russell 2000, however, is now back in correction territory with a decline of -11.26%. The Nasdaq, which remains in correction territory, is down -13.21% from their all-time high close. The S&P 500 is in pullback territory with a decline of -9.10%.

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.

You typically need a catalyst for those to take place, and the Middle East conflict was the backdrop for that.

But it's also important to remember that geopolitical conflicts and events usually only have a short-term impact on the markets. In fact, over the last 40 years of geopolitical shocks, markets usually bounce back quite fast. And historically, they are typically higher 12 months later. Same goes for 6 months. Even the 3-month outlook leans positive.

And if you know pullbacks and corrections are commonplace moves, and geopolitical impacts on the market are usually short-lived, you can instead look at them as opportunities to buy rather than places to sell.

Nonetheless, we are now in week 5 of the conflict.

All eyes will be on next week's deadline (Monday, 4/6) for Iran to accept a peace deal with the U.S. and reopen the Strait.

If no peace agreement emerges by then, that would put the war at week 6, with no clear path to an end.

In other news, Fed Chair Jerome Powell said yesterday that "inflation expectations do appear to be well anchored beyond the short-term," and that "we do think our policy is in a good place for us to wait and see." He furthered that by saying, "by the time the effects of a tightening in monetary policy take effect, the oil price shock is probably long gone, and you're weighing on the economy at a time when it's not appropriate. So, the tendency is to look through any kind of a supply shock." Translation, while higher energy prices do increase inflation, the oil disruption is likely temporary, so we're not looking to raise rates right now.

The market is still expecting one, 25-basis point rate cut this year, albeit at the end of the year. But I would make the argument that the Fed might cut sooner rather than later, since higher energy prices act as a tax on consumers and businesses. And for that, I would not be surprised to see that timeline moved up to provide some relief to the economy.

Note: this week is a shortened trading week. The markets will be closed on 4/3 for Good Friday. So, there could be some extra volatility this week leading into a 3-day weekend.

In the meantime, with stocks approaching oversold conditions, we'll see if the market can stabilize or bounce higher.

See you tomorrow,