It may take more than oil spiking above $110 a barrel to crush the market's soul. Assuming prices don't rise much more, the worst may be over for stocks, creating some opportunities for bargain-hunting.
An encouraging sign: the market's behavior on Thursday. Oil prices surged after President Donald Trump indicated the war may last longer than previously expected. Yet with signs of diplomacy perking up, markets rebounded after an initial selloff. The Dow Jones Industrial Average rose 3% for the week. The S&P 500 was up 3.4% and the Nasdaq Composite gained 4.4% -- the biggest weekly gains for all three indexes since late November 2025. The market is closed on April 3 for Good Friday.
Oil around $110 a barrel certainly stings, but it may not last. Futures contracts are pricing crude oil in the $80s by July, drifting into the $70 for the rest of the year.
For now, the economy isn't turning negative. The Atlanta Fed's GDPNow estimate for first-quarter growth has slid since the war started, but it's still positive at 1.6%. Falling oil prices would alleviate fears about inflation, allowing the Federal Reserve to hold interest rates steady. Rate cuts could be back on the table if the economy continues to weaken.
Some strategists say it's time to start bargain-hunting.
"The world isn't ending. You can pick your spots," says Stephanie Link, chief investment strategist at Hightower Advisors. She's bullish on home builders Toll Brothers and D.R. Horton, calling them "ridiculously cheap." They're trading around 11 and 13 times 2026 earnings estimates, respectively, and would benefit if rates come down. She also favors Starbucks and Target as value stocks with attractive dividends, yielding 2.7% and 3.8%, respectively.
The Magnificent Seven group of Big Tech stocks is down an average 11% this year, reflecting fears about artificial intelligence's growth and negative consequences for margins and revenue growth -- both in tech and the broader economy. AI "disrupts the certainty" of cash returns for incumbent tech companies and adds more volatility to earnings, note strategists at 22V Research. Yet "it appears that a decent amount of the AI uncertainty is priced" in, they add.
Tech stocks are starting to look more reasonable. The Roundhill Magnificent Seven exchange-traded fund is trading for about 27 times forward earnings estimates, near a five-year low. The State Street Technology Select Sector SPDR ETF has a price/earnings ratio of 21 based on this year's earnings forecasts, in line with the multiple for the S&P 500.
"There are opportunities in the market, and tech is a big part of it. Tech is now undervalued," says Marta Norton, chief investment strategist at Empower Investments, a retirement plan provider.
Corporate profits will be the next big test as first-quarter earnings roll in. Delta Air Lines and Constellation Brands kick things off the week of April 6. Major U.S. banks go next, led by JPMorgan Chase, along with companies such as Johnson & Johnson, ASML, Netflix, and PepsiCo.
Analysts expect S&P 500 earnings to increase 13% from a year ago. If companies beat targets and issue solid guidance, it should ease the market's obsession with oil and set the stage for a recovery.
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