Baker Market Update 2026-04-17

There were not a lot of fireworks on the economic calendar this week. That said, the geopolitical picture remained anything but quiet, with the Iran conflict now entering week seven. Following this past weekend's fruitless peace talks in Islamabad, on Monday the 13th, the US Navy implemented a blockade that would prohibit all ships entering or exiting Iranian ports along the Persian Gulf and Gulf of Oman. The Strait of Hormuz handles roughly 20% of all global oil shipments, and unsurprisingly, US Energy Secretary Chris Wright expressed concerns about rising oil prices until a meaningful resolution is realized. Against that backdrop, diplomatic efforts have continued to inch forward. The Pakistan-brokered ceasefire is quietly running out of road, but Friday morning brought at least one piece of good news, as Iranian officials declared the Strait of Hormuz fully open for the remainder of the truce. Domestic markets responded favorably, with US Treasuries and broad equity indices both catching a bid on the headline Friday morning.

Although the economic calendar was lighter than usual this week, we did receive some encouraging news on the inflation front. The Producer Price Index (PPI) for final demand came in below both the prior month's reading and survey expectations. Final demand goods prices rose 0.5% in March, meaningfully below the expected 1.1% increase and February's reading of 0.7%. The services component, which has historically been the stickiest segment of PPI in the post-COVID inflation environment, increased by just 0.03% in March. The bulk of the month's increase was concentrated in energy, which could see meaningful relief should peace talks in the Middle East continue to progress.

Much like the services component of inflation, domestic bond yields have begun to find some relief as well. At the time of writing, the 2-year US Treasury yield has fallen approximately 15 basis points since Monday, reflecting a meaningful shift in market sentiment over the course of a single week. Expectations for the benchmark federal funds rate have also nudged slightly more to the downside, as short-term inflation expectations have begun to moderate in tandem with energy prices, which have continued to retreat from their March highs.

Next week, we will receive data regarding the health of the retail and manufacturing sectors, as well as a look into consumer confidence as measured by the University of Michigan Consumer Sentiment survey. Have a good weekend everyone!