Wall Street closes at a record for the first time since end of January
Investing.com - Futures linked to the main U.S. stock indices tick down, as the specter of a U.S. Navy blockade on the Strait of Hormuz and sputtering negotiations between Washington and Tehran clouded sentiment. Oil prices move back above $100 a barrel, with markets fretting over the longevity of a shaky U.S.-Iran ceasefire deal. Elsewhere, results from lender Goldman Sachs are due to kick the U.S. corporate earnings season into gear, while European luxury goods giant LVMH is also scheduled to report.
1. Futures lower
U.S. stock futures were pointing lower on Monday, with investors parsing through President Donald Trump’s threat to impose a blockade on the Strait of Hormuz following failed weekend talks between the U.S. and Iran.
By 03:28 ET (07:18 GMT), the Dow futures contract had fallen by 239 points, or 0.5%, S&P 500 futures had slipped by 40 points, or 0.6%, and Nasdaq 100 futures had declined by 168 points, or 0.7%. Stocks in Europe and Asia wobbled, while oil leaped and the dollar firmed.
The main averages on Wall Street closed in mixed fashion on Friday, as caution took hold ahead of the crunch negotiations between Washington and Tehran in Pakistan. A temporary two-week ceasefire was announced last week, although it remains uncertain whether the fragile deal will lead to a permanent end to hostilities.
Traders were also assessing data showing a surge in consumer price gains in March that was fueled largely by a jump in gasoline pump costs due to a war-induced energy shock. Oil prices have spiked since the start of the Iran conflict in late February, driven by an effective closure of tanker traffic through the Strait of Hormuz, a narrow waterway off of Iran’s southern coast through which roughly a fifth of the world’s oil squeezes.
2. Trump announces Strait of Hormuz blockade
On Sunday, Trump announced that the U.S. Navy would begin an "immediate" blockade to prevent ships from entering or exiting the strait.
The president warned that no ship who has paid an effective toll charged by Tehran will have "safe passage on the high seas."
However, a statement from the Pentagon later noted that while any ships "entering or departing Iranian ports or coastal areas" will be blocked, other boats will be allowed to traverse the strait.
The developments came after the U.S. and Iran finished 21 hours of negotiations in Pakistan without an agreement to solidify the ongoing ceasefire. U.S. Vice President JD Vance, who led the American delegation during the discussions, said Iran had refused to accept U.S. demands to refrain from developing a nuclear weapon. Iran did not immediately provide a comment on the talks, although Pakistan -- which has served as a mediator -- stressed that both sides must "uphold their commitment to ceasefire."
3. Oil climbs back above $100 a barrel
Oil prices rose on Monday, spiking once again above the $100 a barrel threshold.
Brent crude futures, the global benchmark, was last higher by 6.7% at $101.65 a barrel, while U.S. West Texas Intermediate crude futures had jumped by 7.1% to $103.42 a barrel.
Despite the climb, analysts at Pepperstone suggested that the market reaction to news of a U.S. blockade had been "relatively contained," as market participants "view the move largely as a negotiating gambit" from Trump.
"While it’s clearly a risk-averse start to the trading week, [...] the general market reaction can be summed up as ‘could be worse’," said Michael Brown, Senior Research Strategist at Pepperstone, in a note.
Following the initial announcement of the ceasefire last week, which itself came after Trump threatened to destroy all of Iranian "civilization" should the Strait of Hormuz not be reopened, crude prices fell below $100 a barrel. Still, oil hovered well above pre-war levels.
4. Goldman Sachs to report
Earnings from major Wall Street banks will be in focus this week, beginning with quarterly results from Goldman Sachs.
Goldman reported a 19% jump in first-quarter profit, thanks to robust volatile markets which underpinned a record three-month period at its trading and banking units.
Dealmaking activity, buoyed by a resilient economy and massive investments in artificial intelligence infrastructure, also aided results. Overall, the quarter was Goldman’s second-best ever for profit and revenue, behind results in the first quarter of 2021 that were powered by a COVID-era rebound.
Revenue climbed by 14% to $17.23 billion, while profit of $5.63 billion, or $17.55 a share, beat expectations.
Other major banks due to report this week include JPMorgan Chase, Wells Fargo, Citigroup, Bank of America and Morgan Stanley.
5. LVMH ahead
LVMH, the world’s largest luxury goods name and the parent of labels like Louis Vuitton and Dior, is set to report first-quarter sales today, with the Iran conflict also likely to be a key factor in the firm’s outlook.
Sales at brands owned by LVMH and peers such as Kering and Hermes have declined in destinations like Dubai and Abu Dhabi because of the fighting, in a setback for the $400 billion luxury industry, Reuters has reported.
At the Mall of the Emirates in Dubai, in particular, luxury brand sales dropped by as much as 50% in March, the news agency said, adding that traffic at the Dubai Mall had fallen by a similar amount. Sales at the Galleria mall in Abu Dhabi were down around 10% across the board.
While the relatively small size of the Middle East means that the Iran war’s impact of quarterly sales at LVMH might be limited, its effects on profits -- which the company unveils on a half-year basis -- may be larger, according to analysts cited by Reuters.
