Dow drops 475 points on inflation and geopolitical concerns

S&P 500 also recorded its most significant decline since January

Dow drops 475 points on inflation and geopolitical concerns
Stock market regain on Monday some of the record losses on Friday

US stock futures edged higher on Monday morning, with investors grappling with multiple concerns, including Iran’s recent missile and drone attack on Israel and heightened volatility in equity markets, which led to the Dow Jones Industrial Average experiencing its worst week of the year last week.

Futures linked to the Dow Jones Industrial Average rose by 132 points, or 0.36%, while S&P 500 futures and Nasdaq-100 futures also saw gains of 0.42% and 0.45%, respectively.

Wall Street faced significant turbulence on Friday as concerns over inflation and geopolitical tensions triggered a sell-off in the stock market. According to CNBC on Thursday, the Dow Jones Industrial Average plummeted by 475.84 points, marking a 1.24% decline, to close at 37,983.24. Similarly, the S&P 500 experienced its worst day since January, dropping by 1.46% to 5,123.41, while the Nasdaq Composite saw a 1.62% decline, closing at 16,175.09.

Throughout the trading session, the Dow experienced a drop of nearly 582 points, or 1.51%, while the S&P 500 slid by as much as 1.75%. For the week, the broader market index recorded a 1.56% decrease, with the 30-stock Dow falling by 2.37%. Meanwhile, the Nasdaq, known for its tech-heavy composition, ended the week 0.45% lower.

The banking sector also faced significant headwinds, with JPMorgan Chase witnessing a more than 6% decline following the release of its first-quarter results. The bank’s CEO, Jamie Dimon, cautioned about persistent inflationary pressures impacting the economy. Similarly, Wells Fargo reported a slight dip of 0.4%, while Citigroup experienced a 1.7% drop despite surpassing revenue expectations.

Concerns over geopolitical tensions and inflation pressuring markets

Amid escalating tensions in the Middle East, oil prices are poised to surge beyond $100 per barrel, according to market analysts. The trigger for this forecast is Iran’s recent aerial assault on Israel, reigniting fears of a regional conflict. Iran, being a key player in global oil markets as the third-largest producer within OPEC, holds significant sway over oil prices. According to the CNBC report, any disruption to its oil production or export capabilities could drive prices even higher, especially if the strategic Strait of Hormuz is affected, a crucial passage for one-fifth of global oil supply.

Gold futures, which had hit record levels last week slightly retreated to $2,360 an ounce. The precious metal remains up 15% for the year as investors seek refuge from persistent inflation and global uncertainties.

Krishna Guha, Evercore ISI’s senior managing director, noted that while the situation remains perilous, there might be less risk to oil and markets than feared before the attack. He highlighted the crucial question of how Israeli Prime Minister Benjamin Netanyahu will respond, considering the Biden administration’s stance against Israeli retaliation.

“Provided that Netanyahu looks like he is willing to follow US advice, there may be some element of a relief rally in markets Monday. However, our colleagues in the energy team do not expect a big retracement in the price of oil,” said Guha.