· Wall St. brushes off Middle East tensions as tech-related shares gain
Stocks rose on Monday, recovering losses from earlier in the session as oil dipped despite rising geopolitical worries following last week’s U.S. killing of Iran’s top general.
The Dow Jones Industrial Average ended the day up 68.50 points, or 0.2% at 28,703.38 after falling 216 points earlier in the day. The S&P 500 closed 0.4% higher at 3,246.28 while the Nasdaq Composite advanced 0.6% to 9,071.46.
Big tech stocks led the gains. Facebook and Amazon both rose more than 1%, and Netflix and Google-parent Alphabet advanced 3.1% and 2.7%, respectively.
· Escalated geopolitical tensions swooped in and spoiled the market’s party in the new year, and Wall Street analysts warned the sell-off might be just beginning.
After a historic run in 2019 and a strong first day of 2020, the S&P 500 fell after a U.S. airstrike in Iraq killed Iranian Gen. Qasem Soleimani on Friday, spiking oil prices. Stocks had a weak start to Monday’s session before notching slight gains as the crude spike eased.
Such geopolitical shocks have historically led to sharp pullbacks in stocks with the S&P 500 declining 6% to 7% on average in the wake of the events, according to Savita Subramanian, head of U.S. equity and quantitative strategy at Bank of America Merrill Lynch. Subramanian researched past shocks such as Brexit and Argentina’s debt collapse.
She believes the pullback this time will be in line with the historical average before recovering later this year.
· Jim Iuorio, managing director of TJM Institutional Services, believes if the S&P 500 dips below 3,200, it could go all the way down to 3,025. The S&P 500 fell 0.2% to around 3,225 on Monday morning before climbing back.
“I took some profits today on my hedges. I have some trades in that’s going to make me more short if we go below those levels,” Iuorio said Monday on CNBC’s “Worldwide Exchange.”
Iuorio said gold is a buy right now, expecting the precious metal to trade up to $1,700 an ounce. Gold futures hit $1,590.90 per ounce, their highest level in more than six years.
To be sure, while seeing a deeper sell-off ahead, analysts are not forecasting a bear market or an economic recession as stocks typically bounce back from losses triggered by geopolitical events.
· Asian shares rebounded on Tuesday as a day passed without a new escalation in the Middle East and Wall Street erased early losses to end in the black as tech stocks climbed.
MSCI’s broadest index of Asia-Pacific shares outside Japan added 0.3%, after a 0.7% drop the previous session. Japan’s Nikkei edged up 0.5% and South Korea 0.6%.
Shares had fallen sharply on Monday as Iran and the United States traded threats after an U.S. air strike killed a top Iranian commander.
Reference: CNBC, Reuters
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