Trump Says Operation Ahead of Schedule but Traders Aren’t Convinced
President Trump is optimistic that the war with Iran will end quickly, saying the operation is “ahead of schedule.” But in my opinion, this is wishful thinking especially if Iran blocks the Strait of Hormuz and continues to bomb its Arab neighbors. An analyst at Barclays said he didn’t think the war would drastically alter the U.S. economy, but that it’s still too early to buy dips. Since the new year began, investors have gotten used to entering new positions on weakness, but buying while the war is still escalating could turn into a risky proposition.
Oil’s 7% Surge and Quick Reversal Says the Strait Risk Isn’t Priced In
Oil jumped over 7% on the opening then promptly sold off to nearly fill in its overnight gap. This tells me that traders haven’t fully priced in the possible closing of the Strait, where roughly 25% of the world’s oil is transported daily. Besides the fear of creating an oil shortage, there are also new concerns that inflation pressures could be reignited.
Tech and Banking Lead the Decline While Defense and Energy Shine
The selling pressure today hit across all sectors with losses led by tech and banking shares. Stocks like Broadcom, Amazon and Alphabet fell in the tech sector, while Morgan Stanley and Goldman Sachs dragged the financial sector lower.
The bright spots were defense companies like Northrop Grumman, Lockheed Martin and RTX. Oil companies like Exxon Mobil and Chevron also posted solid gains.
ISM Manufacturing Expands but SPX Still Faces Resistance at 50-Day MA
In economic news, the U.S. manufacturing sector expanded in February for the second straight month but only the third time in 40 months, according to the ISM manufacturing PMI report. The headline number is bullish for stocks, but employment is still contracting and there are still concerns about tariffs hurting corporate earnings.
