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Stocks closed lower Monday and oil prices climbed on escalating tensions in the Middle East. Market participants also took a cautious stance ahead of another busy week of corporate earnings and Friday’s key jobs report.
Over the weekend, President Donald Trump said via Truth Social that the U.S. will begin guiding ships out of the Strait of Hormuz that have been stranded there during the conflict between the U.S., Israel and Iran.
“This is a Humanitarian gesture on behalf of the United States, Middle Eastern Countries but, in particular, the Country of Iran,” Trump wrote in his post. “Many of these Ships are running low on food, and everything else necessary for largescale crews to stay on board in a healthy and sanitary manner.”
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Stocks were mostly higher at Monday’s open, but the price action quickly shifted after the United Arab Emirates said it intercepted three missiles coming from Iran.
At the close, the blue-chip Dow Jones Industrial Average was down 1.1% at 48,941, the broader S&P 500 was 0.4% lower at 7,200, and the tech-heavy Nasdaq Composite was off 0.2% at 25,067.
As for oil prices, front-month West Texas Intermediate crude futures rose more than 4% to settle at $106.42 per barrel.
Norwegian Cruise Line gets hit by higher fuel costs
The ongoing conflict in the Middle East is creating headwinds for Norwegian Cruise Line (NCLH). Shares plunged 8.6% after the cruise operator reported a top-line miss for its first quarter. The company also lowered its full-year outlook, citing higher fuel costs as one of several difficulties it is facing.
“Our outlook reflects an extremely challenging backdrop for the balance of the year,” said Chief Financial Officer Mark Kempa on the earnings call. “Keep in mind, our prior guidance did not include any impacts from the disruptions in the Middle East, which is creating incremental headwinds, including pressure on the top line and higher fuel expense.”
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Kempa added that managing these costs is occurring at the same time as the company adjusts its revenue management systems, improves marketing and addresses a slow start to the year for bookings.
The earnings calendar picks up in earnest after the close, with tech giant Palantir Technologies (PLTR, +1.4%) set to report.
UPS posts its worst day in nine months on Amazon blow
This will open up the e-commerce giant’s logistics services to all businesses, allowing them to “move, store, and deliver everything from raw materials to finished products quickly and reliably, using the same supply chain that supports Amazon.com.”
Fellow industrial stock FedEx (FDX, -9.1%) also declined on the news.
GameStop sinks on $56 billion eBay offer
GameStop (GME) was another notable decliner on Monday, with the original meme stock sinking 10.1% after a report in The Wall Street Journal said the video-game retailer is making an unsolicited bid to buy eBay (EBAY, +5.1%) for $56 billion in cash and stock.
According to the report, GME has built a 5% stake in EBAY since early February, and its buyout bid represents $125 per EBAY share — a 20% premium to the online retailer’s May 1 close.
“EBay should be worth — and will be worth — a lot more money,” GameStop CEO Ryan Cohen told The Wall Street Journal. “I’m thinking about turning eBay into something worth hundreds of billions of dollars.”
Bernstein analyst Nikhil Devnani sees “real challenges” to the deal. “With $9 billion of cash and securities on hand, GME would need a significant amount of leverage and/or equity issuance to buy out EBAY,” Devnani says.
He adds that eBay “itself is in the midst of a turnaround — one that is going well, but to the extent there are any challenges/volatility from categories like Collectibles this could put further strain on the math.”
