Wall St ends sharply lower as intensifying Iran war, soaring crude prompt selloff
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A trader working on the New York Stock Exchange floor before the closing bell on March 12.
PHOTO: EPA
- US Stocks fell as Iranian strikes caused crude prices to surge, exacerbating inflation fears; the S&P 500 had its largest drop in a month.
- Geopolitical tensions and rising crude prices decreased “the likelihood of Fed cuts later this year,” according to Carson Group’s Mr Detrick.
- The Federal Reserve is expected to convene on March 17 to discuss interest rates and inflation estimates amidst war and economic data releases.
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NEW YORK - US stocks fell on March 12, as Iranian strikes on two oil tankers sent crude prices surging towards US$100 a barrel, further exacerbating inflation fears and sending investors fleeing equity markets.
All three major US stock indexes slid more than 1.5 per cent in a broad selloff, with everything but energy and some defensive stocks suffering steep percentage losses.
The S&P 500 notched its biggest three-day percentage drop in a month.
Iran’s Supreme Leader Ayatollah Mojtaba Khamenei vowed to keep the crucial Strait of Hormuz shut, and the International Energy Agency (IEA) warned the war on Iran was creating the largest-ever oil supply disruption, feeding fears of mounting inflation pressures.
Front month WTI crude futures settled up 9.7 per cent on the day, while Brent settled up 9.2 per cent, touching US$100 a barrel.
US President Donald Trump’s administration has told US oil companies and shippers to prepare for a possible waiver of the century-old Jones Act, which governs domestic shipping, in an effort to mitigate rising fuel prices, according to sources familiar with the discussion.
“There’s a realisation that a resolution to the Middle East conflict is being pushed further out,” said Mr Ryan Detrick, chief market strategist at Carson Group in Omaha. “It’s a sell first, ask questions later type of mentality. There hasn’t been safe sector outside of energy.”
The US Federal Reserve convenes on March 17, and while recent inflation data suggest price growth is under control, the 13-day-old war on Iran and the resulting spike is crude prices have yet to filter through the data. While the central bank is widely expected to leave its key interest rate unchanged, its updated summary of economic projections will be scrutinised for adjusted inflation estimates.
“Under the surface of soaring crude prices is the realization that the likelihood of Fed cuts later this year is quickly dwindling,” Mr Detrick added.
In light of recent credit quality concerns, Swiss private equity firm Partners Group warned private credit default rates could double in the next few years.
Morgan Stanley limited redemptions at one of its private credit funds, while JPMorgan Chase reduced the value of some loans to private credit funds on March 12. Their shares slid 4.1 per cent and 1.6 per cent, respectively.
Federal Reserve vice-chair for supervision Michelle Bowman outlined regulatory changes that would relax requirements for the amount of cash banks must set aside for potential losses, in a move seen as a victory for Wall Street lenders.
The Dow Jones Industrial Average fell 739.42 points, or 1.56 per cent, to 46,677.85, the S&P 500 lost 103.22 points, or 1.52 per cent, to 6,672.58 and the Nasdaq Composite lost 404.15 points, or 1.78 per cent, to 22,311.98.
Among the 11 major sectors of the S&P 500, energy was the biggest gainer, rising 1 per cent, while industrials sliding 2.5 per cent, notched the steepest percentage loss.
Dating app operator Bumble jumped 34.2 per cent after its fourth-quarter revenue guidance came in above estimates.
Discount retailer Dollar General slid 6.1 per cent following its disappointing annual comparable sales forecast.
Agricultural fertiliser firms, which also rely on shipments through the Strait of Hormuz, advanced on surging prices. The S&P Fertilizer and Agricultural Chemicals index jumped 4.9 per cent. Chemical companies LyondellBasell and Dow advanced 10.3 per cent and 9.3 per cent, respectively, following a Citigroup upgrade on new export opportunities arising from supply chain disruptions in the Middle East.
On March 13, a raft of economic indicators is expected, including consumer sentiment, durable goods, job openings/labour turnover, and the broad-ranging personal consumption expenditures report.
Declining issues outnumbered advancers by a 4.18-to-1 ratio on the NYSE. There were 117 new highs and 198 new lows on the NYSE.
On the Nasdaq, 1,100 stocks rose and 3,600 fell as declining issues outnumbered advancers by a 3.27-to-1 ratio.
The S&P 500 posted 17 new 52-week highs and 25 new lows while the Nasdaq Composite recorded 33 new highs and 172 new lows.
Volume on US exchanges was 19.96 billion shares, compared with the 20.05 billion average for the full session over the last 20 trading days. REUTERS
