(April 2): US stocks dropped on Thursday as President Donald Trump’s hardline speech undermined hopes for an early reopening in the Strait of Hormuz and a resolution of the conflict in the Middle East.
The S&P 500 Index fell 1.1% as of 9:51am in New York, while the Nasdaq 100 Index slid 1.6% as steep declines in Tesla Inc and Micron Technology Inc weighed on the index. Brent crude climbed above US$109 per barrel while the Cboe Volatility Index also advanced to around 27.
In a prime-time speech, Trump vowed that there would be more military attacks in coming weeks. However, he fell short of committing to reopening of the Strait of Hormuz, telling oil-importing countries to purchase crude from the US instead.
“For today, I think we see resetting of some hedges and maybe some short-term bearish bets as it is difficult to identify positive catalysts which could occur over the holiday weekend,” Andrew Tyler, JPMorgan Chase & Co’s head of global market intelligence, wrote in a note to clients.
Even with Thursday’s decline, the S&P 500 was on course for its first weekly gain after the longest streak of losses in years.
Since the war began, US stocks have followed a pattern of selling off starting on Thursday after starting the week on a stronger note. The S&P 500 was on the brink of correction territory on Monday before bouncing back strongly on Tuesday and Wednesday on reports that the US and Iran want to end the conflict soon.
See also: US stocks extend rally on war-end optimism, oil falls
“Stocks rallied for the past days driven on hope — hope alone — that there would be tidy and speedy end to the conflict in the Gulf,” said Mark Malek, chief investment officer at Muriel Siebert & Co. “Unfortunately, that view, while possible, was not highly probable, at least at the moment.”
Investors were also likely to sell equities heading into the long weekend “because everything is a yo-yo based on oil,” said Jeffrey Young, PGIM’s head of investment strategy for quantitative solutions. The US stock market is closed on Friday for a holiday.
“You don’t really know which way oil is going to go, which way will events go during the weekend,” Young said. “You just want to reduce risk generally.”
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On the data front, initial jobless claims fell to one of the lowest levels in the last two years. The US trade deficit widened in February by less than forecast as both imports and exports increased.
Sectors to watch
- All Magnificent Seven stocks slipped after Trump’s speech on Iran dashed hopes for an early resolution in the war.
- Energy stocks rebounded while travel, mining and semiconductor names fell on the prospect of higher energy prices for longer.
- Metals and finished goods stocks dropped as the Trump administration is preparing to roll out tiered tariffs on steel and aluminum imports.
- Shares of alternative asset managers tracked Blue Owl Capital lower after the firm said it will limit redemptions from two of its private credit funds.
Uploaded by Magessan Varatharaja
