Fastenal Co. sells industrial and construction supplies, including fasteners, at approximately 1,600 stores and 1,800 onsite locations, as well as through vending machines at customer locations and through e-commerce channels. Most of the company's customers are in the manufacturing and nonresidential construction markets. Headquartered in Winona, MN, the company has over 20,000 employees and its shares are a component of the S&P 500.

Stock are solidly higher at midday on Friday, with the S&P 500 up about 1.2%, the Dow Jones Industrial Average up about 2%, and the Nasdaq Composite up about 1.5%. Earnings season has managed to grab the attention of investors, as should be the case at this point on the calendar, as the ongoing war in Iran is becoming less of a worry, at least for Wall Street. Iran has announced that the Strait of Hormuz is 'completely open' and there are expectations that diplomatic talks will start up again over the coming weekend. Meanwhile, a ceasefire is in place between Israel and Lebanon and appears to be holding. Turning back to stocks and with a focus on sectors, Consumer Discretionary is atop the leader board today, up over 3% as of this writing, followed by Industrials (+2.15%), and Information Technology (+1.81%). On the bottom of the sector-performance list for the day is (no surprise) Energy. The sector is off about 4.4% today as crude oil is off 10% and at about $81.23/barrel, down from over $100 earlier this week. The only other down sector for the day is Utilities, off 1.45%.

Fastenal began as an industrial retailer, expanding its product portfolio from nuts and bolts to cutting tools, safety equipment, and janitorial supplies. It transitioned into a distributor by building out a dense network of branches close to its business customers. Once a customer becomes large enough, Fastenal installs vending machines and its own personnel on-site. Today, these on-site locations exceed Fastenal’s branch count and remain the firm’s main focus for expansion. Fastenal acts as a one-stop outsourcing partner for its industrial customers, offering value-added services along with a wide breadth of maintenance, repair, and operations supplies.

Since the onset of the war in Iran, the U.S. Treasury yield curve has maintained an upward slope, signaling economic growth in the quarters ahead. But it also has shifted a bit -- with nuanced implications for the economy and interest rates. First, the curve has pushed higher. Back in late February, the 2-year Treasury note yield was 3.4% and the 10-year yield was 4.0%. Now, those rates are 3.9% and 4.4%, respectively. This shift higher in the yield curve implies inflation may be poised to make a comeback, likely driven by higher energy prices. Second, the upward slope of the yield curve has flattened a bit. In late February, the spread between the 2-year and 10-year bonds was 60 basis points. Now, that is down to 50 basis points. This tightening of the yield curve points toward a potential slowdown in the rate of economic growth, though we note that the curve is nowhere near an inverted state (which has long been associated with economic weakness). We anticipate the yield curve will maintain its upward slope through 2026. This assumes that the war in Iran ends in the not-too-distant future, oil prices come down off their highs, and the Fed, with a new chairman at the helm in May, can be in a position to lower short-term interest rates at least once later this year. At the long end of the curve, inflation and Fed policy are not the only factors influencing market rates of interest. Total U.S. sovereign debt is at 120% of GDP, meaning Treasury issuance can 'crowd out' the bond market and drive up yields. And federal budget deficits continue to swell. The responses in the market should, in our view, continue to result in an upward-sloping yield curve that points toward solid intermediate-term economic growth.