Investors should buckle up for a bumpy ride as multiple risks have suddenly converged to test what looked like an unstoppable stock rally.
In just the last few days, the Iran war started heating up again, the AI boom showed signs of a bubble about to burst, and strong jobs data made rate hikes from the Federal Reserve more likely.
Futures tied to the Dow Jones industrial average fell 86 points, or 0.17%. S&P 500 futures were down 0.19%, and Nasdaq futures lost 0.16%.
U.S. oil futures rose 2.6% to $92.88 a barrel, while Brent crude climbed 2.8% to $95.67. Gold fell 0.5% to $4,342 per ounce.
The U.S. dollar was up 0.03% against the euro and up 0.02% against the yen. The yield on the 10-year Treasury was flat at 4.532%.
While talks to extend the ceasefire have stalled, President Donald Trump scrambled to avoid reigniting the war by distancing the U.S. from the Israeli attacks, which were in retaliation against Hezbollah missiles, and by telling Israeli Prime Minister Benjamin Netanyahu not to strike back at Iran.
Prior months were also revised sharply higher, indicating the labor market was much more resilient than previously thought in the face of higher oil prices caused by the Iran war.
With the employment picture looking steadier, the Fed is expected to focus more on fighting inflation, which has exceeded the central bank’s 2% target for five years. Investors priced in a greater probability of tighter monetary policy, giving up on the prospect of additional rate cuts anytime soon.
The coming week will likely see even more volatility as fresh readings on consumer inflation on Wednesday and producer inflation on Thursday fuel additional Fed rate hike fears.
SpaceX plans to raise at least $75 billion by selling over 555 million shares at $135 a piece, valuing the company at more than $1.75 trillion. If underwriters exercise options for additional allotments to meet high demand, proceeds could grow to $85.7 billion.
“We think many of the standalone SpaceX flows might be digestible. The problem is that many of these flows are potentially same-way and additive,” Boutle explained. “With the SpaceX free float reported to be close to $75bn on IPO, it’s easy to see how $30bn of passive buying, a retail investor chase, and levered ETF and option flows collectively could quickly become challenging for the stock’s liquidity. If all are chasing to buy (or sell) at the same time, the risk of price dislocation becomes much greater.”
