(April 7): US stocks dropped as intensifying geopolitical tensions and mixed economic data weigh on investors ahead of a key US deadline on Iran.
The S&P 500 Index retreated 0.730% at 10:20am in New York, with 10 of the 11 industry groups trading lower, led by consumer discretionary and technology stocks. The Nasdaq 100 Index lost 1.11%. The Cboe Volatility Index hovered around 26.28.
The backdrop for equities remains challenging amid developments in the Middle East. President Donald Trump’s deadline for Iran to agree to a deal that includes freedom of navigation through the Strait of Hormuz is due later Tuesday, with outcomes ranging from a diplomatic breakthrough to potential military escalation. Meanwhile, Iran pressed on with attacks across the Persian Gulf.
“You have to ask what the markets do on a ‘mission accomplished’ headline, you also have to ask what they do on a ‘45-day ceasefire’ headline, and you also have to ask what they do on a ‘boots-on-the-ground’ headline,” Tony Pasquariello, partner and global head of hedge fund coverage at Goldman Sachs Group Inc, wrote in a note to clients Monday.
The conflict has already triggered the largest disruption to the global oil market on record, with crude prices surging and dated Brent — the world’s most important price for real-world barrels — topping US$140, signalling acute supply tightness.
“Even if tensions ease, normalisation will trail, leaving upside risk to prices and potential product shortages,” wrote Salih Yilmaz, Bloomberg Intelligence senior industry analyst.
See also: US stock rally hits wall as ceasefire doubts cool optimism
In March, the S&P 500 lost about 5% amid the ongoing war in Iran, prompting traders to cut positioning across equities. Systematic investors are now poised to flip back into equity-buying mode, according to Goldman Sachs Group Inc, as the wave of selling appears to be drying up.
From a technical perspective, the S&P 500 is approaching key chart resistance, namely the 200-day moving average. Decisively closing above this average can spur more buying, according to Anthony Feld, Bloomberg Intelligence senior technical strategist.
“If the 200-DMA is breached, the rally can extend to the bottom of the channel,” Feld wrote in a note.
See also: Stocks gain as US-Iran truce deal spurs oil plunge
Meanwhile, equity bulls expecting a bumpy ride for US equities to be over soon have a historically favorable seasonal pattern on their side. April tends to be a strong month for stocks, with the S&P 500 Index sporting an average gain of 1.5% since 1990, trailing only November’s 2.2% advance, data compiled by Bloomberg shows.
In corporate news, billionaire activist Bill Ackman has proposed a bid for Universal Music Group NV, the world’s largest music company, which houses the likes of Taylor Swift, Drake and Sabrina Carpenter, to increase returns on one of his hedge fund’s biggest holdings. Shares of Universal Music gained 11.52%.
Among other single stock movers, Broadcom Inc shares rose 3.26% after the chipmaker announced a long-term agreement with Google to develop and supply Tensor Processing Units. Shares of major insurance companies also gained after the Centers for Medicare and Medicaid Services finalised a 2.48% rate hike for health insurers in 2027. Investors see the pay boost as a meaningful improvement over the initial rates the agency proposed in January.
Looking ahead, traders are also awaiting key inflation reports as well as a reading on US consumer sentiment due later this week.
Uploaded by Magessan Varatharaja
