On Friday the S&P 500 Index ($SPX) (SPY) closed down -1.51%, the Dow Jones Industrial Average ($DOWI) (DIA) closed down -0.96%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed down -1.88%. March E-mini S&P futures (ESM26) fell -1.39%, and March E-mini Nasdaq futures (NQM26) fell -1.83%.
Stocks fell Friday, sending the S&P 500, Dow Jones Industrials and Nasdaq 100 to 6.25-month lows. Stocks fell sharply on Friday amid concerns about the impact of the war with Iran on inflation and increased energy costs on economic growth.
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Stock losses deepened Friday after CBS reported that Pentagon officials had made detailed preparations for deploying U.S. ground troops to Iran. Additionally, Axios reported that the US is considering taking over Kharg Island, Iran’s key oil-exporting site, in order to pressure Iran into reopening the Strait of Hormuz. The Wall Street Journal reported Friday that the Pentagon is deploying three warships and thousands of Marines to the Middle East.
Additionally, inflation fears pushed global bond yields higher on Friday and weighed on stocks. The 10-year T-note yield hit a 7.5-month high of 4.39% on Friday, the 10-year UK gilt yield hit a 17.5-year high of 5.02%, and the 10-year German Bund yield hit a 14.75-year high of 3.05%.
The Iran war entered its twenty-first day on Friday with no end in sight as Iran escalates attacks on neighboring states. Kuwait said on Friday it closed several units at its Al Ahmadi refinery after several attacks and Bahrain reported a fire at a warehouse. Also, Saudi Arabia and the United Arab Emirates said they intercepted Iranian missiles and drones on Friday.
Crude oil prices (CLJ26) remain high despite efforts to boost global supply. The IEA released 400 million barrels from emergency oil reserves last Wednesday and said the war against Iran was disrupting 7.5% of global oil supply, and the conflict would cut global oil supply by 8 million bpd this month. The closure of the Strait of Hormuz, through which about a fifth of the world’s oil and natural gas flows, has blocked the flow of oil and gas due to Iran’s attacks on shipping in the waterway and forced Gulf producers to cut output because they cannot export from the region. Iran has attacked about 20 ships in the Persian Gulf and near Hormuz since the conflict began. Goldman Sachs has warned that if flows through the Strait of Hormuz remain low through March, crude oil prices could exceed 2008’s record high of $150 a barrel.
Markets are giving a 12% discount to a +25bp FOMC rate hike at the April 28-29 policy meeting.
Foreign stock markets closed with a decline on Friday. The Euro Stoxx 50 fell to a 4-month low and closed down -2.00%. China’s Shanghai Composite fell to a 2.5-month low and closed down -1.24%. Japan’s Nikkei stock was down 225 for the Vernal Equinox Day holiday.
interest rates
June 10-year T-notes (ZNM6) settled at -23 ticks on Friday. The 10-year T-note yield rose +13.7bp to 4.386%. June T-notes fell to a contract low on Friday, and the 10-year T-note yield hit a 7.5-month high of 4.392%. T-note yields have risen sharply over the past two weeks on concerns that the Iran war will drive up energy prices leading to inflation and even force the Fed to tighten monetary policy. Friday’s rise in European government bond yields also put pressure on T-notes on negative carryover, as the 10-year UK gilt yield hit a 17.5-year high and the 10-year German Bund yield hit a 14.75-year high.
European government bond yields rose on Friday. The 10-year German Bund yield hit a 14.75-year high of 3.049% and gained +8.2bp to 3.043%. UK 10-year gilt yields rose to a 17.5-year high of 5.022% and touched +15.0bp to 4.994%.
German February PPI fell -3.3% y/y, weaker than expectations of -2.7% y/y and the biggest decline in 1.75 years.
Joachim Nagel, an ECB Governing Council member and Bundesbank President, said the ECB may have to consider raising interest rates next month if price pressures due to the Iran war increase further.
The swaps are discounting a 79% chance of a +25bp ECB rate hike at its next policy meeting on April 30.
US Stock Movers
Magnificent Seven Technology stocks moved lower on Friday, which is a negative factor for the overall market. Nvidia (NVDA) and Tesla (TSLA) closed down more than -3%, and Alphabet (GOOGL) and Meta Platforms (META) closed down more than -2%. Additionally, Amazon.com (AMZN) and Microsoft (MSFT) closed down more than -1%, and Apple (AAPL) closed down -0.39%.
There was a selloff in chip stocks and AI-infrastructure companies on Friday, which weighed on the broader market. Sandisk (SNDK) closed down more than -8%, and Western Digital (WDC) closed down more than -7%. Additionally, Seagate Technology Holdings PLC (STX) and Intel (INTC) closed down more than -5%, and Micron Technology (MU) closed down more than -4%. Additionally, ASML Holding NV (ASML) closed down more than -3%, and Broadcom (AVGO) and Lam Research (LRCX) closed down more than -2%.
Airline shares fell on Friday on concerns that rising fuel costs would hit corporate profits. United Airlines Holdings (UAL) closed down more than -4%, and American Airlines Group (AAL) and Southwest Airlines (LUV) closed down more than -3%. Additionally, Delta Air Lines (DAL) and Alaska Air Group (ALK) closed down more than -2%.
Home builders and building suppliers retreated on Friday as 10-year T-note yields hit a 7.5-month high, a bearish factor for housing demand. DR Horton (DHI), Lennar (LEN), Toll Brothers (TOL), and Builders FirstSource (BLDR) closed down more than -3%. Additionally, Pulte Group (PHM), Home Depot (HD), and KB Home (KBH) closed down more than -2%.
Super Micro Computer (SMCI) closed down more than -33%, leading the S&P 500 after the company reported that the U.S. Attorney’s Office had indicted three executives for allegedly conspiring to commit export-control violations.
Mosaic (MOS) closed down more than -9% after Freedom Capital Markets downgraded the stock from Hold to Sell.
Planet Labs (PL) closed up more than +25% after forecasting revenue of $415 million to $440 million in 2027, well above the consensus of $379.6 million.
SM Energy (SM) closed up more than +8% after JPMorgan Chase upgraded the stock from Restricted to Overweight with a $40 price target.
ARM Holdings PLC (ARM) closed up more than +1% to lead the Nasdaq 100 after HSBC double-upgraded the stock to buy from low with a price target of $205.
Verizon Communications (VZ) closed up more than +1%, leading the Dow Jones Industrials lead after Citigroup raised its price target on the stock from $50 to $55.
Chipotle Mexican Grill (CMG) closed up more than +1% after Mizuho Securities upgraded the stock from Neutral to Outperform with a $40 price target.
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On the date of publication, Rich Asplund did not have (directly or indirectly) any positions in any securities mentioned in this article. All information and data in this article is for informational purposes only. Please see the Barchart Disclosure Policy here for more information.
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