(March 26): US stocks pared an early decline on Thursday after Iran’s Tasnim news agency said Tehran has formally delivered its response to the US ceasefire proposal.
The S&P 500 Index retreated 0.4% as of 10.21am in New York, trimming an earlier loss of as much as 0.9%. The Nasdaq 100 Index also curbed its losses to about 0.7%. Brent crude oil prices climbed to US$106 per barrel while the Cboe Volatility Index rose to around 26.
Earlier, President Donald Trump urged Iran to get serious about negotiations soon before it’s “too late” in a post on Truth Social. The warning comes about 48 hours before the US delay on strikes on Iranian energy infrastructure is set to expire. Axios reported the Pentagon is developing military options for a “final blow” in Iran that could include ground troops.
“Traders’ enthusiasm over the likelihood of a quick deal to end the conflict in the Persian Gulf have faded as it appears that the Iranians have little current interest in talks,” said Steve Sosnick, chief strategist at Interactive Brokers.
Without another positive catalyst, the market is “mired in a short- to medium-term downtrend” after the S&P 500 Index stalled at its 200-day moving average on Wednesday, he added.
See also: US stocks rise, oil falls as truce prospects weighed
Oil came into renewed focus as the conflicts showed no sign of letting up. Iran is drafting a Bill to impose a fee on vessels seeking safe passage through the Strait of Hormuz, according to the Fars news agency. Meanwhile, Trump administration officials are examining what a potential spike in oil prices to as high as US$200 a barrel would mean for the economy, according to people familiar with the matter.
“It is the ongoing, multi-dimensional push-pull between the what the President is tweeting, what the Iranian regime is saying,” said Mark Malek, chief investment officer at Siebert Financial.
“Overall, I think that traders are slowly factoring in a new case where the Strait of Hormuz closure will be even longer than the worst-case scenario most of us modeled just two or three weeks ago,” Malek added.
See also: Oil falls, US stock futures climb on Iran hopes
BlackRock Inc president Rob Kapito said investors may be underestimating the risks stemming from the Iran war, while oil may still spike to US$150 a barrel even the war is over as it would take time for disrupted supply chains to return to full capacity.
Investors are looking at last Friday’s low as the potential floor for the S&P 500 Index, according to Jay Woods, chief global strategist at Freedom Capital Markets.
“Market disconnect from earnings continues as the Iranian War and rising oil prices continue to move markets,” Woods said.
Chip stocks extended declines after Google researchers touted a new compression technique that could reduce the amount of memory needed for artificial intelligence worldwide. Micron Technology Inc and Sandisk Corp both fell in early trading, with Asian manufacturers such as SK Hynix Inc and Kioxia Holdings Corp moving lower overnight.
Later on Thursday, several Fed speakers are scheduled to speak. Initial jobless claims through March 21 edged up to 210,000 applications, in line with expectations. Investors are also awaiting Kansas City Fed manufacturing activity for March, due later in the morning.
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