Investing.com — U.S. stocks traded in a mixed fashion Tuesday, helped by some healthy corporate results but with risk appetite soured by the ongoing conflict in the Middle East.
At 06:40 ET (10:40 GMT), the Dow Jones Industrial Average gained 140 points, or 0.4%, while the S&P 500 dropped 3 points, or 0.1% and NASDAQ Composite dropped 10 points, or 0.1%.
Middle East instability weighs
The instability in the Middle East has weighed heavily on risk appetite of late, with Israel seen preparing retaliation for a large-scale missile and drone strike by Iran over the weekend. While Iran’s attack had done little damage, it raised the possibility of a wider war in the Middle East.
Markets appear “cautiously optimistic that Israel’s response will be restrained, and that an all-out war will be sidestepped,” said Matthew Ryan, Head of Market Strategy at global financial services firm Ebury.
“Investors will have been encouraged by the relative ease at which Israel and its allies almost entirely neutralised the strike, which seemed more symbolic than intent on causing maximum destruction. Calls for a measured Israel response among world leaders will no doubt have also settled a few jitters.”
However, the situation remains very fluid, and “the key for markets will now be the extent of the retaliation. Should Israel follow up with similarly ambitious missile attacks or, under a worse-case scenario, other nations become embroiled in the conflict, notably the U.S., then we would likely see a flight to safety in markets,” he added.
Additionally, a large volume of long positions in U.S. stocks are already experiencing losses, and this could lead to increased market pressure, Citigroup strategists said in a weekly note.
The strategists noted in their analysis that there are long positions worth $52 billion on the S&P 500, with 88% of them currently in the red, posing a risk to the market.
“Long unwinds on the S&P have mainly been profit-taking transactions, but the remaining longs now are on average 0.8% in loss,” they wrote.
“Should the market turn negative the move could be faster and larger due to the large, long positions already in the red.”
Morgan Stanley impresses with first quarter results
Also helping sentiment has been the release of some generally well received earnings reports, particularly from the important banking sector.
Morgan Stanley (NYSE:MS) stock jumped 1.5% after the banking giant posted a rise in profit in the first quarter, lifted by a resurgence in investment banking from a two-year dealmaking drought.
Bank of New York Mellon (NYSE:BK) gained 0.6% after reporting a 5% increase in profits, as rising asset values boosted investment services fees, while Bank of America (NYSE:BAC) stock slipped 1.4% after the lender reported a decline in interest payments.
Results from the banking sector had started on Friday in a disappointing fashion, but Goldman Sachs (NYSE:GS) had turned the page on Monday.
Elsewhere, Johnson & Johnson (NYSE:JNJ) stock slipped 1.7% after the healthcare giant reported disappointing first-quarter revenue numbers as sales from its blockbuster psoriasis drug Stelara fell short of expectations.
UnitedHealth Group (NYSE:UNH) stock rose almost 6% after the health insurer maintained its 2024 forecast even as it disclosed a potential hit of up to $1.6 billion this year related to a data breach at its Change Healthcare (NASDAQ:CHNG) unit, in its first full public disclosure of the financial impact of the cyberattack.
Powell speech awaited for more rate cues
Several members of the Federal Reserve are also set to speak later on Tuesday, with particular focus on Chair Jerome Powell for any more cues on interest rates. Powell is set to have a discussion with Bank of Canada Governor Tiff Macklem.
Powell’s talk comes in the wake of increasing signs that U.S. inflation will remain sticky in the coming months, giving the central bank more impetus to keep rates higher for longer. Markets were seen largely wiping out bets on a June rate cut.
The day’s economic data showed a small rise in industrial production in March, as well as weak housing starts and building permits, suggesting the housing sector is feeling the strain of the elevated interest rates.
Crude steadies after Chinese growth data
Crude prices edged lower Tuesday, as the renewed confidence in the Middle East outweighed stronger than expected Chinese growth data.
By 06:40 ET, the U.S. crude futures traded 0.3% lower at $85.17 a barrel, while the Brent contract was 0.2% lower at $89.89 per barrel.
The Chinese economy grew more than expected in the first quarter, and this has supported the crude market, given a recovery in the world’s biggest oil importer this year has been the main bullish factor driving forecasts.
Oil prices soared last week to the highest levels since October, but fell on Monday after Iran’s weekend attack on Israel proved to be less damaging than anticipated, easing concerns of a quickly intensifying conflict hitting supply from this oil-rich region.
(Ambar Warrick contributed to this article.)
https://www.investing.com/news/stock-market-news/us-stock-futures-subdued-amid-middle-east-interest-rate-fears-3379245
