Wall Street posts three-week losing streak as Iran war batters sentiment
Microsoft (MSFT) pullback dominoes to a material market correction. Microsoft earnings beat top and bottom but disappointed on its cloud business and had a capital expenditures budget higher than expected. The stock is down 11.8% (-12.3% YTD, -4.1% LTM) and has taken the whole tech sector down with it. The NASDAQ went down 2.3%, as did semiconductors. The Magnificent 7 is down 1.6%. This has pulled the S&P down 1.3%, while the even-weighted S&P is down only 0.3%. The Dow is down 0.4% and the Russell 2000 is down 1.1% in sympathy. The VIX has jumped to 19.4
Adding to today’s damage is a pullback in gold, down 2.2%, and silver, 3.5%. On the flipside, copper is up 3.4%, hitting as high as $6.58, a new all-time high. Crude oil is up 3.7% to $65.20/bbl, almost peaking at $66.50, up over 10% in a week on the risk of a conflict in Iran, the highest since June ’25. Natural gas and gasoline are higher as well.
In another sign of risk-off sentiment, crypto is down materially, with Bitcoin down 5% to below $85K, the lowest in a year.
Interest rates are surprisingly calm, with the US 2-year down 2bps to 3.55%, the 10-year down 1bps to 4.23%. International yields are the same, including Japan. The US dollar index is also flat on the day.
The damage is largely contained in tech and basic materials, with energy higher, and communication services are higher on the strength of Meta (META), which also had earnings last night, with solid beats top and bottom and a well-received earnings call. The shares are up 7.6%, +9% YTD, +6.3% LTM. Consumer staples, utilities, industrials, financial services, and real estate are all in the green today.
This appears to be a classic buying opportunity. We’re already seeing a bounce off the bottom in all the major indexes. Another factor at play is the possibility of another government shutdown, which is challenging in the data blackout that we are still suffering from in last year’s record-long shutdown. While seeing the S&P hitting 7,000 just yesterday and then having it bottom at 6,870 today is more volatility than investors are used to, the underpinnings of the economy remain strong. Volatility is clearly higher, but the trend is nevertheless still positive.