Wall Street eased from record highs yesterday and oil prices spiked as increasing tensions over the crucial Strait of Hormuz gave rise to concerns that the fragile US-Iran ceasefire might not hold.
All three major US stock indexes were modestly lower in early trading, putting the Nasdaq on course to snap a 13-day winning streak, its longest since January 1992.
But the losses were shallow, held in check by optimism over solid first quarter corporate earnings.
“There’s nothing going on save for the headlines of the day regarding Iran: the Strait (of Hormuz) is closed and we took a step backward over the weekend,” said Peter Tuz, president of Chase Investment Counsel in Charlottesville, Virginia.
“(Investors) have been surprised by how strong some earnings have been, and absent evidence to the contrary, I think that’s going to continue this week,” Tuz added. “That’s mitigating the headlines regarding Iran to a great degree.”
With no major economic data and a short roster of first quarter earnings reports yesterday, geopolitical tensions in the Middle East were the primary market catalyst. The Dow Jones Industrial Average fell 111.32 points, or 0.23 per cent, to 49,336.11, the S&P 500 fell 17.88 points, or 0.25pc, to 7,108.27 and the Nasdaq Composite fell 99.55 points, or 0.41pc, to 24,368.49.
European shares slid on growing concerns that the US-Iran ceasefire agreement could collapse after Iran responded to the US seizure of a cargo ship by refusing to participate in a second round of negotiations.
MSCI’s gauge of stocks across the globe fell 3.04 points, or 0.28pc, to 1,071.72. The pan-European STOXX 600 index fell 0.87pc, while Europe’s broad FTSEurofirst 300 index fell 21.24 points, or 0.85pc. Emerging market stocks rose 5.12 points, or 0.32pc, to 1,602.25. MSCI’s broadest index of Asia-Pacific shares outside Japan closed higher by 0.53pc, to 819.24, while Japan’s Nikkei rose 348.99 points, or 0.60pc, to 58,824.89. Fears of ceasefire collapse also sent crude oil prices higher as traffic through the Strait of Hormuz remained largely halted.
US crude rose 5.15pc to $88.21 a barrel and Brent rose to $94.86 per barrel, up 4.96pc on the day.
US Treasury yields edged higher amid mounting geopolitical uncertainty. The yield on benchmark US 10-year notes rose 2.2 basis points to 4.266pc, from 4.244pc late on Friday. The 30-year bond yield rose 1.4 basis points to 4.8989pc from 4.885pc late on Friday. The 2-year note yield, which typically moves in step with interest rate expectations for the Federal Reserve, rose 3.1 basis points to 3.731pc, from 3.7pc late on Friday.
Gold softened as Treasury yields inched higher. Spot gold fell 0.31pc to $4,813.55 an ounce. US gold futures fell 1.04pc to $4,807.00 an ounce.
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