U.S. Indexes Drop 1% After Treasury Yields Jump, Iran-Israel War Escalation Worries Global Markets

Barry Adams
15 Apr, 2024
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Benchmark indexes on Wall Street erased morning gains after Treasury yields rose following yet another economic report indicating strong economic fundamentals. 

Retail sales March rose faster than expected, supporting the case for the Federal Reserve to keep higher rates for longer. 

The S&P 500 index and the Nasdaq Composite advanced in Monday's trading after registering a loss in the previous two weeks in a row. 

But market enthusiasm faded after Treasury yields edged higher following the release of stronger-than-expected retail sales in March. 

U.S. retail sales in March rose 4% from a year ago and advanced 0.8% from the previous month, according to the U.S. Census Bureau. 

The larger-than-expected increase in retail sales helped market sentiment overcome the worries of a widening war in the Middle East, but rising Treasury yields pushed stock market indexes into negative territory. 

Global markets advanced despite rising prospects of a wider war in the Middle East after Iran conducted its first-ever direct attack on Israel. Stronger-than-expected retail sales supported a rise in U.S. Treasury yields and a decline in U.S. stocks.

Iran conducted its first-ever direct missile and drone attacks targeting Israeli territory over the weekend, retaliating for Israel's military strike on Iran's embassy in Syria on April 1. 

The prospect of a wider war in the Middle East raised worries about crude oil supply disruptions and more attacks in the Red Sea. 

Crude oil futures prices traded volatile amid growing worries of supply disruptions in the Middle East, and Brent crude oil prices hovered near a five-month high of $84.62 a barrel in New York. 

Investors are hoping that Israel's prime minister, Benjamin Netanyahu, will avoid a retaliatory strike and prevent the conflict from further escalating after U.S. President Joe Biden's administration urged Israel to restrain and exercise caution. 

 

U.S. Indexes and Yields

The S&P 500 index decreased 0.9% to 5,074.52, and the Nasdaq Composite fell 1.5% to 15,935.59. 

The yield on 2-year Treasury notes edged higher to 4.95%, 10-year Treasury notes inched up to 4.63%, and 30-year Treasury bonds edged up to 4.73%.

Crude oil prices surged after Iran conducted its first-ever direct attack on Israel in response to Israel's attack on Iran's embassy in Syria on April 1. 

WTI crude oil decreased $0.31 to $85.33 a barrel, and natural gas prices decreased 8 cents to $1.68 a thermal unit.

Gold increased by $23.56 to $2,366.53 an ounce, and silver rose 88 cents to $28.74. 

The dollar index, which weighs the U.S. dollar against a basket of foreign currencies, edged lower to 106.11.

 

U.S. Stock Movers

Tesla declined 2.8% to $166.26 on the news that the electric vehicle maker is planning to cut 10% of its global headcount. 

"We have done a thorough review of the organization and made the difficult decision to reduce our headcount by more than 10% globally.

 There is nothing I hate more, but it must be done. This will enable us to be lean, innovative, and hungry for the next growth phase cycle," said chief executive Elon Musk in a memo sent to employees. 

The electric vehicle industry news publication Electrek first reported on Tesla's internal memo. 

Charles Schwab increased 4% to $72.83 after the company reported better-than-expected quarterly results. 

Net revenue in the March quarter declined 7% to $4.7 billion from $5.1 billion, net income fell 15% to $1.36 billion from $1.60 billion, and diluted earnings per share dropped 18% to 68 cents from 73 cents a year ago. 

Net interest margin increased by 13 basis points from the previous quarter to 2.02% due to greater margin balance utilization and a decline in outstanding supplemental funding. 

Asset management and administration fees increased by 21% over the prior year to a record $1.3 billion. 

Goldman Sachs Group increased 3.8% to $404.40 after the financial services provider reported better-than-expected quarterly results. 

Net revenue in the first quarter rose 16% to $14.2 billion; net earnings increased 28% to $4.1 billion from $3.2 billion; and diluted earnings per share advanced 32% to $11.58 from $8.79 a year ago. 

 

European Markets Trim Gains, Eurozone Industrial Production Rebounded 

European markets rebounded in Monday's trading, and the euro held firm amid rising geopolitical tensions in the Middle East. 

Benchmark stock indexes in Frankfurt, Paris, and London edged higher in volatile trading, but bond yields in the eurozone traded in a tight range despite rising tensions in the Middle East.

Industrial production in the Euro Area increased 0.8% from the previous month and contracted 6.6% from a year ago in February, Eurostat reported Monday. 

Production of capital goods rebounded to 1.2% from a decline of 15.5% in January; durable consumer goods recovered to 1.4% from a decline of 1.2%; and intermediate goods output expanded at a slower pace of 0.5% from a 2.3% increase in the previous month, respectively. 

Meanwhile, non-durable consumer goods output fell 0.9% compared to 0.2%, and energy output decreased 3.0% after rising 0.4% in the previous month, respectively. 

 

Europe Indexes and Yields

The DAX index increaed by 0.5% to 18,026.58, the CAC-40 index rose by 0.4% to 8,045.11, and the FTSE 100 index inched lower by 0.4% to 7,965.53.

Last week, the DAX index decreased 0.7%, the CAC 40 index fell 0.1%, and the FTSE 100 index added 1.5%. 

The yield on 10-year German bonds edged up to 2.40%; French bonds inched higher to 2.91%; the UK gilts edged higher to 4.24%; and Italian bonds inched lower to 3.77%.

The euro edged higher to $1.065; the British pound inched higher to $1.245; and the U.S. dollar edged lower to 91.27 Swiss cents.

Brent crude decreased $0.61 to $89.92. a barrel, and the Dutch TTF natural gas rose by €0.72 to €31.54 per MWh.

 

Europe Stock Mover

Temenos soared 20% to CHF 74.15 after the Swiss software company confirmed that a special committee by the board confirmed that the accusations levied by the U.S.-based short seller Hindenburg lacked merit and were misleading. 

Telenor ASA rose 0.5% to €10.42 after the Norwegian telecom company said its chief financial officer, Tone Hegland Bachke, plans to leave the company and join SHV Holdings NV. 

Mitie Group soared 6.6% to 119.0 pence after the company launched a stock buyback plan. 

Ageas increased 3.6% to €44.02 after Fosun Group agreed to sell its 9% stake in the Belgian insurance company for €730 million. 

Glanbia advanced 3.7% to €17.52 after the UK-based nutrition company agreed to acquire the U.S.-based Flavor Producers LLC for an initial consideration of $300 million. 

Ashmore Group declined 3% to 182.30 pence after the emerging markets fund manager said assets under management declined 4% from the previous quarter. 

Inchcape increased 5.3% to 735.50 pence after the UK-based automotive distributor agreed to sell its UK retail operations to Group 1 Automotive UK for £346 million.   

 

China Stocks Face Headwinds Ahead of Tuesday's Economic Reports 

Stocks in Shanghai and Hong Kong diverged amid rising tensions in the Middle East. 

Iran conducted its missile and drone attacks targeting Israeli territory over the weekend, retaliating for Israel's military strike on Iran's embassy in Syria. 

The prospect of a wider war in the Middle East raised worries about crude oil supply disruptions and more attacks in the Red Sea. 

Crude oil futures prices traded volatile amid growing worries of supply disruptions in the Middle East, and Brent crude oil prices advanced to a five-month high of $90.16 a barrel in Singapore trading. 

The CSI 300 index increased 2.2% to 3,549.08, and the Hang Seng index decreased 0.7% to 16,613.29. 

The Hang Seng index decreased to a three-week low amid weak market sentiment as investors await the release of first quarter gross domestic product, March retail sales, and jobless rate data on Tuesday. 

China has set a target rate of 5% for the economy to expand in 2025, but investors are worried that the second-largest economy in the world may face headwinds in meeting its lofty goal. 

Last week, China reported that exports declined 7.5% in March and consumer prices rose 0.1%, confirming a fragile recovery and weak consumer demand. 

China property prices were in focus, after China Vanke said it has sufficient funds to meet its liquidity requirements.

S&P Global downgraded the real estate developer's long-term credit rating, following similar moves by Fitch Ratings and Moody's earlier in the month. 

The company also denied that travel restrictions were imposed on its key executives and rejected the idea that the company's anchor shareholders were siphoning off funds from the company's accounts. 

Chairman Yu Liang and President Zhu Jiusheng said during the meeting held on Sunday that the company is working on its plan to lower its debt by 100 billion yuan or $13.8 billion by next year. 

The company also confirmed that it has support of its largest shareholder Shenzhen Metro and state asset regulator of Shenzhen, according to a regulatory filing.  

Moreover, the company is set to complete and deliver apartment homes in a timely manner. 

China Vanke decreased 1.3% to HK$3.80, China Resources Land fell 3.3% to HK$33.30, and Longfor Group eased 0.7% to HK$9.34. 

Zhiejiang Honxing Technology soared more than 260%, and the electric vehicle wheelmaker listed its stock on the Shenzhen stock exchange at 38.69 yuan per share.