Wall Street posts three-week losing streak as Iran war batters sentiment
The tariff turmoil is bringing rising uncertainty. Iran’s situation is pushing oil and gold higher.
Stocks are pulling back across the board, and the VIX is up to 20.8. The tariff situation has brought a great deal of uncertainty, including refunding the tariffs already collected, Trump’s insistence that he has full authority to implement tariffs despite the Supreme Court’s ruling, and how the various countries may choose to proceed with existing tariff agreements.
Geopolitical risks are very elevated at the moment. The Iran situation finds the US assembling the greatest concentration of military assets in many years in order to get Iran to agree to nuclear disarmament. Crude oil has vaulted to $67.25/bbl, up over 6% in a week, the highest level in 9 months. Gold is up 2.7% today, moving past $5,200/oz. Silver is up 5.7% to $87/oz in part due to the turmoil in Mexico, the largest silver exporter, where the drug cartels are wreaking havoc after the assassination of one of their leaders, to the point of international flight into Mexico being canceled.
Interest rates are lower, with the US 2-year down a tick to 3.47%, the 10-year down 3bps to 4.06%. Bets on a Fed cut are softer, with the first cut most likely moving from June to July, and a 2nd cut from September to October. International yields are also lower due to geopolitical risks. The US dollar index is modestly lower. Crypto is lower again, with Bitcoin at $65.8K, as low as $64.4K overnight, down 26.5% in a month.
Tech is down over 1% today, still down 2.1% YTD, with software taking a new leg lower, down 4.4% (now -27% YTD) on the threat of AI being able to offer cheaper solutions. The Magnificent 7 is down 1% with only NVIDIA and Apple in the green. NVIDIA’s (NVDA) earnings after the close on Wednesday will be a watershed event for the AI theme.
It’s become more of a stock-picking year, with dividend and value names back in the lead. The trend has shifted to negative in the short term, and we probably need more clarity on the tariff situation and an easing of geopolitical risks to get back on track to the focus on strong earnings and economic growth.