Futures in decline: Dow 1.06%, S&P 500 0.63%, Nasdaq 0.62%
Goldman Sachs falls after earnings release
Sandisk advances after inclusion in the Nasdaq-100
Update prior to market opening by Niket Nishant and Avinash P
The major Wall Street indices 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 rally and risking a new wave of volatility.
The declines indicate that any relief from last week’s ceasefire agreement could be short-lived, underscoring the risks of overconfidence in bullish bets when the geopolitical environment remains uncertain.
U.S. stock indices had recorded their second consecutive week of gains on Friday, hoping that peace talks in Pakistan would bear fruit.
However, on Monday, the Dow E-minis YMcv1 dropped by 509 points, or 1.06%, at 8:32 a.m. ET, the S&P 500 E-minis EScv1 lost 43.25 points, or 0.63%, and the Nasdaq 100 E-minis NQcv1 slipped 157.5 points, or 0.62%.
Adding to the unease, the U.S. military is hours away from initiating a blockade of all maritime traffic entering or exiting Iranian ports and coastal areas, aiming to increase pressure on Tehran.
The CBOE market volatility index .VIX, the market’s fear gauge, jumped by 21.29 points.
The change in sentiment was also evident in other asset classes, with investors favoring the safe haven of the U.S. dollar while reducing exposure to stocks across all geographical regions.
Oil prices rose above $100 per barrel, heightening inflation fears after last week’s data showed a record increase in gasoline and diesel prices resulting in the largest consumer price surge in the U.S. in nearly four years in March.
“We are back in the realm of a wide range of plausible outcomes, ranging from a new round of negotiations during an uneven ceasefire… to a complete resumption of hostilities,” said Hasnain Malik, strategist at Tellimer for geopolitical risk and emerging markets.
Goldman falls after earnings release
Hopes for earnings relief were dampened after Goldman Sachs’ stock GS.N dropped by 4.5% in after-market trading following the bank’s quarterly results.
Although the investment bank beat earnings per share estimates, it did so with the thinnest margin in over two years.
“We do not think the market is paying much attention to this result. And all of this is due to the prospects of higher inflation, weaker economic activity, and a Fed that may have to remain on hold for a long time,” said Peter Cardillo, chief market economist at Spartan Capital Securities.
Attention is now turning to comments from Goldman’s management, which will be scrutinized for clues on how the seven-week conflict in the Middle East is impacting the economy and capital markets.
Its rivals Morgan Stanley MS.N, JPMorgan Chase JPM.N, and Citigroup C.N each lost 2%, 1.9%, and 1.8%, respectively.
Industrial supplies distributor Fastenal FAST.O also dropped by 3% after its earnings release.
Travel-related stocks declined, with carriers like Delta Air Lines DAL.N and JetBlue Airways JBLU.O down by 2.7% and 2.3%, respectively, on fears that rising oil prices would lead to higher fuel costs.
Energy stocks rose, 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 index on April 20.
Later in the day, data on existing home sales in the U.S. are expected, and Federal Reserve Governor Stephen Miran is set to speak.
