Natalia Kniazhevich
Wall Street has pared some of its earlier gains after President Donald Trump said Iran could be “taken out in one night” as he warned Tehran it had to make a deal by the deadline of Tuesday night (Wednesday AEST) or face a wider bombing campaign.
The S&P 500 rose 0.3 per cent in late trade in New York, with eight of the 11 industry groups advancing. The Dow Jones climbed 0.2 per cent and the Nasdaq added 0.5 per cent. Futures for the Australian sharemarket, which were set on Friday, are pointing to a fall of 100 points, or 1.1 per cent, at the open.
Crude oil prices advanced, with Brent, the international standard, up 0.5 per cent to $US109.63 per barrel at 4.57am AEST while West Texas Intermediate added 0.4 per cent to $US111.99. The Organisation of the Petroleum Exporting Countries, or OPEC+, warned on Sunday that damage to Middle East energy infrastructure could have lasting effects on supply even after the conflict ends, as the group approved a largely symbolic increase in output quotas for next month.
Trump ramped up his threats ahead of a deadline he’s imposed for Iran to re-open the Strait of Hormuz or face further attacks on civilian infrastructure, while Tehran rejected a ceasefire proposal.
“Compared to last week, S&P 500 Index options are pricing more near-term volatility into the Trump deadline that came out over the long weekend,” said Chris Murphy, co-head of derivatives strategy at Susquehanna International Group.
Separately, investors digested weaker-than-expected economic data. The US service economy expanded in March at a slower pace as employment shrank by the most since 2023 and input prices accelerated sharply. The ISM services index fell 2.1 points to 54, dragged down by weaker employment and less growth in business activity.
To Kevin Brocks, director at 22V Research, it isn’t a surprise that the Iran war is dragging on business sentiment. “There is little new news here for the Fed,” he added.
US stocks may be bottoming out, according to Morgan Stanley, which recommends starting to add exposure, especially in cyclical sectors and high-quality growth names. “We believe the S&P 500 is carving out a low and think it makes sense to start adding length in cyclical and quality growth trades where earnings remain strong, valuation has compressed, and sentiment is negative,” strategists including Michael Wilson wrote in a note.
Attention now turns to upcoming economic data, with the release of the March consumer price index on Friday. Economists expect a 1 per cent monthly increase, which would mark the largest gain since 2022, following a roughly $US1-per-gallon rise in petrol prices tied to the Iran conflict.
In individual stocks, Carvana shares fell as much as 2.2 per cent before paring losses, after Bank of America analysts downgraded the online used-car retailer to neutral from buy, citing recent macroeconomic and industry developments. Soleno Therapeutics rose 32.43 per cent after the Financial Times reported that Neurocrine Biosciences is in advanced talks to acquire the company. Seagate Technology shares gained 5.54 per cent after Morgan Stanley raised its price target.
Elsewhere, Nvidia partner Hon Hai Precision Industry, also known as Foxconn, reported a roughly 30 per cent increase in quarterly sales, signalling continued strength in artificial intelligence demand. Meanwhile, OpenAI’s chief operating officer is shifting into a new role overseeing special projects and will report directly to chief executive officer Sam Altman.
Novo Nordisk’s chief executive officer said the weight-loss drug market has huge upside and that the industry should focus on expanding access, in an interview with the Financial Times. And Paramount is in talks to secure about $US24 billion ($34.7 billion) in signed equity commitments from three sovereign wealth funds to support its acquisition of Warner Bros. Discovery, the Wall Street Journal reported.
