June S&P 500 E-Mini futures (ESM26) are up +0.69%, and June Nasdaq 100 E-Mini futures (NQM26) are up +0.70% this morning, pointing to a higher open on Wall Street as Treasury yields retreated, while investors continued to monitor developments in the Middle East.
Treasury yields fell across the curve on Monday, with the ten-year rate sliding six basis points to 4.38%, as concerns that the Middle East conflict could spark a sharp economic slowdown led traders to scale back bets on higher interest rates. Money markets reduced the probability of a Federal Reserve rate hike this year to about 20%, down from roughly 35% on Friday. U.S. equity futures drew some support from falling Treasury yields.
Stock index futures’ gains accelerated after President Trump said the U.S. was in talks with “a new, and more reasonable, regime” and that progress had been made. Still, he cautioned that the military would strike Iran’s energy infrastructure if the Strait of Hormuz remained shut.
Meanwhile, the price of WTI crude rose over +1% after Yemen’s Houthi rebels joined the conflict and investors evaluated the likelihood of U.S. troops initiating ground operations in Iran. The Washington Post reported on Saturday that the U.S. Defense Department was bracing for potentially weeks of ground operations in Iran. Separately, The Wall Street Journal reported on Sunday that President Trump is weighing a ground operation to extract uranium from Iran.
Beyond the Middle East conflict, investors are looking ahead to a slew of U.S. economic data, including the all-important monthly employment report, and remarks from Federal Reserve Chair Jerome Powell and other Fed officials this week.
In Friday’s trading session, Wall Street’s major equity averages closed sharply lower, with the Nasdaq 100 and Dow falling into correction territory. The Magnificent Seven stocks slid, with Amazon.com (AMZN) and Meta Platforms (META) dropping about -4%. Also, software stocks sank, with Datadog (DDOG) plunging over -7% to lead losers in the S&P 500 and Nasdaq 100, and Atlassian Corp. (TEAM) sliding more than -4%. In addition, cybersecurity stocks slumped after Fortune reported that Anthropic PBC was testing a new AI model that “poses unprecedented cybersecurity risks,” with Okta (OKTA) tumbling over -7% and Palo Alto Networks (PANW) sinking nearly -6%. On the bullish side, Entergy (ETR) climbed over +6% and was the top percentage gainer on the S&P 500 after Meta reached an agreement with the utility’s Louisiana subsidiary, under which it will fund new energy infrastructure to support an upcoming data center in the region.
Economic data released on Friday showed that the University of Michigan’s U.S. March consumer sentiment index was revised lower to 53.3, weaker than expectations of 53.9. Also, the University of Michigan’s U.S. March year-ahead inflation expectations were revised upward to 3.8%, stronger than expectations of 3.6%, while 5-year implied inflation expectations were unrevised at 3.2%, better than expectations of 3.5%.
Richmond Fed President Tom Barkin said on Friday that the Middle East conflict risks adding to already elevated inflationary pressures and clouds the economic outlook at a time when the labor market is fragile. “I’ll be watching carefully the impact of this latest shock on both inflation and inflation expectations,” Barkin said. Separately, Philadelphia Fed President Anna Paulson said the spike in commodity prices fueled by the Middle East conflict poses a greater risk to the U.S. economy, given that inflation has been elevated for years. “There’s a little bit more of a risk that the transmission of higher fuel prices, higher fertilizer prices, into inflation expectations is faster and maybe a little bit more durable,” Paulson said.
Meanwhile, U.S. rate futures have priced in a 96.4% probability of no rate change and a 3.6% chance of a 25 basis point rate hike at the next FOMC meeting in April.
Investors will be closely watching the U.S. March Nonfarm Payrolls report this week, which will offer a snapshot of the health of the nation’s labor market just as energy prices surge amid the Middle East conflict. Notably, the key U.S. jobs report will be released on Friday, when U.S. stock markets will be closed in observance of Good Friday. The JOLTs Job Openings, ADP Nonfarm Employment Change, and Initial Jobless Claims will offer additional insights into the health of the labor market. “We believe the underlying trend for employment is one of modest but positive growth,” HSBC economists said. The Conference Board’s Consumer Confidence Index and the ISM manufacturing index will also attract attention, providing clues on how the recent surge in energy prices has affected consumer and business sentiment. Other noteworthy data releases include U.S. Retail Sales, Core Retail Sales, the S&P/CS HPI Composite - 20 n.s.a., the Chicago PMI, the S&P Global Composite PMI, the S&P Global Manufacturing PMI, the S&P Global Services PMI, and Trade Balance.
Market participants will also pay close attention to speeches from Fed officials. Fed Chair Jerome Powell is set to participate in a moderated discussion at Harvard University later today, where he may provide clues on how he views the Middle East conflict affecting the balance of risks to inflation and employment. A host of other Fed officials will also be making appearances throughout the week, including Williams, Goolsbee, Barr, Bowman, Musalem, and Logan.
In addition, several prominent companies, including sportswear giant Nike (NKE), the world’s largest spice firm McCormick & Co. (MKC), and Slim Jim owner Conagra Brands (CAG), are slated to release their quarterly results this week.
The U.S. economic data slate is mainly empty on Monday.
In the bond market, the yield on the benchmark 10-year U.S. Treasury note is at 4.38%, down -1.35%.
The Euro Stoxx 50 Index is up +0.10% this morning, supported by lower bond yields, while investors continue to track developments in the Middle East conflict. Energy stocks climbed on Monday, following the rise in oil prices. Shares of renewable companies also advanced on expectations that higher fossil fuel prices would drive a renewed push toward clean energy, lifting the broader utilities sector. In addition, mining stocks gained ground. At the same time, travel stocks slid. The European Commission said on Monday that confidence among companies and consumers in the Eurozone plunged in March as the Middle East conflict delivered another blow to already fragile sentiment. Meanwhile, Eurozone government bond yields fell on Monday, tracking Treasury yields lower, as attention turned to the growth implications of the Middle East conflict. Money markets now put the probability of a European Central Bank rate hike next month at around 60%, down from 100% a week ago. ECB Chief Economist Philip Lane said on Monday that the central bank will not be paralyzed by caution or adjust policy preemptively in response to how the Middle East conflict might affect Eurozone inflation. Investors are now awaiting preliminary March inflation data from Germany due later in the session. Later this week, investors will focus on preliminary Eurozone inflation data for March, which will provide the first glimpse into how consumer prices have been impacted by surging oil prices driven by the Middle East conflict. Katharine Neiss, chief European economist at PGIM, said, “There is nothing that the ECB, or indeed any central bank, can do to offset the direct effect of energy on headline inflation and the impact that has on consumers.” In corporate news, Rio Tinto Plc (RIO.LN) rose over +3% after the miner said operations at three of its four Pilbara iron ore port terminals have restarted following Tropical Cyclone Narelle’s passage through Western Australia’s Pilbara region.
Eurozone’s Business and Consumer Survey and Eurozone’s Consumer Confidence data were released today.
Eurozone’s March Business and Consumer Survey stood at 96.6, stronger than expectations of 96.5.
Eurozone’s March Consumer Confidence came in at -16.3, in line with expectations.
Asian stock markets today closed mixed. China’s Shanghai Composite Index (SHCOMP) closed up +0.24%, and Japan’s Nikkei 225 Stock Index (NIK) closed down -2.79%.
China’s Shanghai Composite Index erased earlier losses and closed higher today, bucking a regional selloff sparked by the escalating Middle East conflict. The benchmark index initially fell as much as -1% but later recovered those losses and turned higher, with gains in gold-related, defense, and energy stocks underpinning the rebound. Still, the Shanghai Composite Index is on track for its steepest monthly decline since January 2024. BNP Paribas analyst William Bratton said on Monday that Chinese equities are likely to grow more appealing if the Middle East conflict drags on, as China is Asia’s most domestically oriented and structurally driven major economy. Meanwhile, China’s market regulator on Monday issued guidelines to better enforce the law against unfair competition, vowing to curb excessive price wars across a range of sectors. In other news, China increased the ceiling on institutional investors’ overseas securities purchases by the most since 2021, seeking to further financial opening and satisfy rising domestic demand for offshore investment. In corporate news, InSilico rose over +2% in Hong Kong after Eli Lilly signed a drug discovery agreement with the company that could be worth up to $2.75 billion. Investor attention this week is squarely on China’s PMI data for March. The readings carry greater significance than usual as they will indicate how businesses are coping with higher input costs driven by the Middle East conflict. ING economists expect the official manufacturing PMI to have finally moved back into expansion territory this month after a prolonged period of contraction.
Japan’s Nikkei 225 Stock Index closed sharply lower today as fears over the escalating Middle East conflict heightened concerns about the economic fallout from rising oil prices. Conglomerate, automobile, and electronics stocks led the declines on Monday. The selloff came as oil prices climbed during Asian trading hours after the Houthis entered the conflict and additional U.S. troops arrived in the Middle East. Nikos Tzabouras, a senior strategist at multi-asset trading platform Tradu, said Japan’s heavy dependence on Middle Eastern oil imports leaves it “uniquely vulnerable,” adding that “the risk from high gas prices is real, and could hit Japan’s manufacturing base, which is still a cornerstone of the economy.” Monday was also the ex-dividend date for many companies with fiscal years ending in March and September, adding further pressure on the benchmark index as investors secured payouts. The Nikkei is on track for its largest monthly decline since 2008. Meanwhile, the yen strengthened against the dollar on Monday after Japan’s currency chief Atsushi Mimura said the nation could take bold action in the foreign-exchange market if the current situation persists. Separately, Bank of Japan Governor Kazuo Ueda vowed to monitor the yen closely. “Exchange-rate fluctuations are one of the key factors that significantly affect our nation’s economy and price conditions,” Ueda told parliament. Elsewhere, the BOJ’s March policy meeting summary showed on Monday that policymakers discussed further rate hikes, with some highlighting the possibility of steady or faster-than-anticipated increases as the Middle East conflict pushes up oil costs and fuels inflation. Investor focus this week is on Japan’s Tokyo core CPI for March, along with industrial production, retail sales, and labor market data for February. The figures will provide insight into the state of the nation’s economy just as the BOJ weighs further rate hikes. The BOJ will also release its quarterly Tankan survey of business sentiment this week. Daiwa Institute of Research economist Kanako Nakamura expects sentiment among manufacturers to improve in the first quarter, supported by a weaker yen and robust chip demand, though the outlook remains uncertain amid the Middle East conflict. The Nikkei Volatility Index, which takes into account the implied volatility of Nikkei 225 options, closed up +48.41% to 49.45.
Pre-Market U.S. Stock Movers
The Magnificent Seven stocks edged higher in pre-market trading, with Meta Platforms (META) gaining over +1% and Microsoft (MSFT) advancing about +0.7%.
Chip stocks advanced in pre-market trading, with Micron Technology (MU) and Intel (INTC) rising over +1%.
Cryptocurrency-exposed stocks rose in pre-market trading, with the price of Bitcoin up more than +2%. Coinbase (COIN) is up over +2%. Also, Strategy (MSTR) and MARA Holdings (MARA) are up more than +1%.
Alcoa (AA) climbed over +8% in pre-market trading after two Middle Eastern aluminum producers reported being struck by Iranian attacks, with investors wagering that the U.S. aluminum company could benefit from supply disruptions.
Origin Materials (ORGN) tumbled more than -18% in pre-market trading after the company posted downbeat Q4 results.
You can see more pre-market stock movers here
Today’s U.S. Earnings Spotlight: Monday - March 30th
Progress Software (PRGS), Rezolve AI (RZLV), Phreesia (PHR).
On the date of publication, Oleksandr Pylypenko did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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