(April 27): US stocks opened nearly unchanged on Monday after a four-week rally, starting a busy week of corporate earnings and the US central bank’s policy meeting with relative calm while investors monitor efforts to reopen the Strait of Hormuz amid stalled Iran peace talks.
The S&P 500 Index edged lower less than 0.1% as of 9.43am in New York while the tech-heavy Nasdaq 100 Index was down 0.3%, as gains on Qualcomm Inc were outweighed by declines in Apple Inc and Microsoft Corp. Brent crude rose 2% to around US$107 per barrel while the Cboe Volatility Index hovered at 19.
Wall Street’s biggest technology stocks, which have helped power the S&P 500 Index’s 10% gain this month, are set to release their financial results. Amazon.com Inc, Alphabet Inc, Meta Platforms Inc. and Microsoft are due to report on Wednesday followed by Apple a day later. All told, these companies represent a quarter of the S&P 500 Index’s market capitalisation.
“We’ve had eight consecutive quarters of double-digit earnings growth in the US market,” said Kristen Bitterly, head of wealth at work at Citigroup Global Markets. “If that sustains, then certainly this investment is going to be sustained, we’ll see the market climb higher.”
Another focus for investors was the direction of the unprecedented rally by US chip stocks.
The Philadelphia Stock Exchange Semiconductor Index, known as the SOX, fell more than 1% early Monday, poised to end its record 18th-straight session of gains. The gauge of US-listed chip stocks was dragged down by Marvell Technology Inc. after its unit Celestial AI cancelled purchase orders to Poet Technologies Inc, sparking a 40% rout in the latter. Those losses outweighed gains in Qualcomm Inc, which rose on speculations that it was working with OpenAI to develop smartphone processors.
The latest financial results from some of US hyperscalers this week could further fuel their strong run.
“What we have seen is that the earnings story is simply there for the AI trade,” said Lori Calvasina, RBC head of US equity strategies, adding that she doesn’t see any residual damage coming out of the Iran war “hitting the earnings of the AI and tech trade that much” while materials, industrials, and consumer discretionary and consumer staples may be affected.
Meanwhile, Axios reported on Sunday that Iran has given the US a new proposal to reopen the Strait of Hormuz and end the war that includes postponing nuclear negotiations. The plan also calls for extending the ceasefire. The report came after President Donald Trump cancelled a planned trip to Pakistan by two of his main envoys.
See also: Nasdaq 100, S&P 500 finish at record on Intel’s blowout results
“The market appears to be reducing its reaction to US/Iran headlines with the outcome trending to a short-term deal followed by more detailed negotiations,” JPMorgan head of global market intelligence Andrew Tyler wrote in a note to clients.
While the US stock benchmark finished at an all-time high last week, there were signs of caution. Volumes remained low and the market breadth was narrow with tech stocks leading the gains. Goldman Sachs prime brokerage desk said hedge funds were using the US equity rally to reduce risks.
“Markets have recovered to new all-time highs while seemingly ignoring continued geopolitical risks that abound and this has been done largely on the back of positive earnings revisions and expectations,” said Walter Todd, president and chief investment officer at Greenwood Capital Associates. “Any cracks that emerge in this outlook as the largest companies report in coming weeks pose a significant risk to market momentum.”
Later this week, the Fed is expected to hold rates steady in its latest interest-rate decision on Wednesday, while a Senate Banking Committee is set to vote on Kevin Warsh’s nomination as chair of the Federal Reserve. Warsh is expected to be confirmed as Jerome Powell’s successor, whose term ends on May 15.
In single-stock moves, Apple shares dropped more than 1% after speculations about Qualcomm’s development of smartphone processors with OpenAI. Domino’s Pizza Inc sank after the company reported revenue for the first quarter that missed the average analyst estimate. Organon & Co surged 17% as Sun Pharmaceutical Industries Ltd has lined up a short-term loan to help finance its US$12 billion ($15.28 billion) acquisition of the New York-listed healthcare company.
Uploaded by Chng Shear Lane
