Futures lower: Dow down 1.06%, S&P 500 0.63%, Nasdaq 0.62%
Goldman Sachs drops after earnings release
Sandisk rises after inclusion in Nasdaq-100
Update before market open by Niket Nishant and Avinash P
Major Wall Street indexes are expected to open lower on Monday after weekend negotiations between the United States and Iran failed to reach an agreement to end the war, threatening a nascent stock market recovery and risking a new wave of volatility.
The declines indicate that any relief from last week’s ceasefire could be short-lived, highlighting the risks of overconfidence in bullish bets when the geopolitical environment remains uncertain.
U.S. stock indexes recorded their second consecutive week of gains on Friday, hopeful that peace talks in Pakistan would yield results.
On Monday, however, Dow E-minis YMcv1 dropped 509 points, or 1.06%, at 08:32 a.m. ET, S&P 500 E-minis EScv1 lost 43.25 points, or 0.63%, and Nasdaq 100 E-minis NQcv1 slipped 157.5 points, or 0.62%.
Adding to the unease, the U.S. military is hours away from starting a blockade of all maritime traffic entering or exiting Iranian ports and coastal areas, in an effort to increase pressure on Tehran.
The CBOE market volatility index .VIX, the market’s fear gauge, rose by 21.29 points.
The shift in sentiment was also evident in other asset classes, with investors favoring the safe-haven U.S. dollar while reducing exposure to stocks across all geographical regions.
Oil prices climbed back above $100 a barrel, heightening inflation fears after data from last week showed a record increase in gasoline and diesel costs driving the biggest rise in U.S. consumer prices in nearly four years in March.
“We are back into the realm of a wide range of plausible outcomes, ranging from a new cycle of negotiations amidst an uneven ceasefire… to a full resumption of hostilities,” said Hasnain Malik, Tellimer strategist for geopolitical risk and emerging markets.
GOLDMAN DROPS AFTER EARNINGS
Hopes of relief on the earnings front were dashed as Goldman Sachs’ stock GS.N fell 4.5% in pre-market trading, following the bank’s quarterly results.
While the investment bank beat earnings per share estimates, it did so with the thinnest margin in nearly two years.
“We don’t think the market is paying much attention to this result. And all of this is due to prospects of higher inflation, weaker economic activity, and a Fed that might be forced to remain on hold for a long time,” said Peter Cardillo, chief market economist at Spartan Capital Securities.
Attention is now focused on comments from Goldman’s management, which will be scrutinized for insights into how the ongoing conflict in the Middle East, now in its seventh week, is impacting the economy and capital markets.
Its rivals Morgan Stanley MS.N, JPMorgan Chase JPM.N, and Citigroup C.N respectively lost 2%, 1.9%, and 1.8%.
Industrial supplies distributor Fastenal’s stock FAST.O also dropped 3% after earnings release.
Travel-related stocks declined, with carriers like Delta Air Lines DAL.N and JetBlue Airways JBLU.O down 2.7% and 2.3% respectively, on fears that rising oil prices could lead to higher fuel costs.
Energy-related stocks advanced, with Chevron CVX.N, Exxon Mobil XOM.N, and ConocoPhillips COP.N gaining 1.9%, 2%, and 2.3% respectively.
Sandisk SNDK.O rose by 1.5% early in the session, as the memory chip manufacturer is set to join the Nasdaq-100 .NDX on April 20.
Later in the day, data is expected on existing home sales in the U.S., and Federal Reserve Governor Stephen Miran is expected to speak.
