Published at 9:50 a.m. CT
JJ Kinahan is Senior Vice President, Head of Retail Expansion and Alternative Investment Products at Cboe Global Markets, Inc. (Cboe).
Key Takeaways:
- Unexpected shift in U.S./Iran peace talks sparks reaction
- Micron’s officially in bear territory
- Fed to release FOMC market minutes
Brace yourself for a possibly rough day of trading. The three major market indices were drenched in red in the early going as investors reacted to escalating geopolitical issues between the U.S. and Iran.
But they lightened up some of the losses as market participants checked in, which could lead to a rocky session as the day wears on. We saw much of that yesterday as the markets tumbled deeper throughout the day but lightened up somewhat by the close.
Meanwhile, oil prices were solidly in the green after the U.S. and Iran traded strikes and the U.S. lifted a waiver that allowed Iran to sell and deliver its oil as part of the 60-day ceasefire. WTI crude oil, which had been sliding in recent sessions as the peace talks looked to be headed toward an end, jumped nearly 5%, flirting with $74 per barrel range early on.
Remember the markets don’t like the unexpected and the sudden shift in peace talks triggered a first reaction to sell on the unknown. Keep watch though, because the downward pressure could change as the situation becomes clearer.
The Dow Jones Industrial Average was heading lower by about 0.82% with the S&P 500 treading down by 0.51%. If the downtrend continues, it will shift the Dow into its first negative week in five weeks. The Nasdaq Composite, which tumbled yesterday amid AI-spending worries, was sliding again, off by 0.70%.
Oil and gas companies were moving higher, with Exxon Mobile up 1.4% and CononcoPhillips shares moving 2.1% as well. Valero Energy added 2%, Chevron up by 1.8% and BP advancing 1.2%.
On the inflation thought-pattern front, the Federal Reserve’s Open Market Committee will release its minutes from last month’s meeting. As you might remember, members unanimously kept interest rates steady at 3.5% to 3.75%. But there was a hawkish tone toward raising interest rates to stave off inflation and the Fed minutes will reveal the extent of it.
The June policy statement was markedly shorter and lacked any forward guidance, shifting gears under new Chair Kevin Warsh. Nine of the 18 FOMC members penciled in a hike at some point this year. Warsh did not issue a projection and the Fed minutes could reveal more of what his thinking is. The markets could react if the minutes show that something rare and wild happened during the meeting.
The CME FedWatch tool is holding a 67% chance that the Fed keeps interest rates pat at its next meeting July 29 but odds are growing for rate hikes later in the year. The tool is showing a 67% possibility that rates will go higher by 25 to 50 basis points in September and a 74% likelihood by October. Stay tuned.
The markets were dragged down yesterday on renewed worries about the depth of AI spending. The Dow backtracked by 0.25%, while S&P lost 0.45%. The Nasdaq was walloped by 1.16% amid a broad decline in tech stocks after Samsung said it was looking at unexpectedly strong earnings results that weren’t good enough to soothe investor sentiment. It appeared much profit-taking was in play.
Micron shares officially dove into bear market territory, falling 4.7% yesterday and treading lower by another 3.5% in the early going. Since touching a record high last month, shares have plummeted some 23% to 27%.
SpaceX shares tumbled some 7% in its debut on the Nasdaq 100 yesterday despite the bullish sentiment from analysts on their first day of releasing earnings and price targets. Shares finished at $149.47, which was above its $135 initial public opening price but below the $160.95 that shares began trading at.
Happy trading!
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