US equities faced a downturn as investors became risk-averse following President Donald Trump's announcement that the tentative ceasefire with Iran had ended, fueling worries of renewed fighting. This led to a slide in the S&P 500 by $0.7%, testing its 50-day moving average, with materials, consumer discretionary, and industrials being the biggest laggards. The tech-heavy Nasdaq 100 also retreated $0.6%. However, US energy stocks rallied, with Brent crude jumping $8% to over $80 a barrel, the highest since June 22, and companies like Chevron Corp., Exxon Mobil Corp., Venture Global Inc., and Diamondback Energy Inc. gaining at least $2%.
Despite the initial market slump, Brian Nick, head of portfolio strategy at Newedge Wealth LLC, viewed the pullback as a dip-buying opportunity, noting that investors who bought equities in the spring have generally been rewarded. He suggested that policy announcements leading to market volatility tend to be quickly reversed. Market strategist Ed Yardeni, however, warned that a rupture in the ceasefire could accelerate price growth and potentially compel the Federal Reserve to raise interest rates.
US stock markets have recently seen volatile swings as investors waver between buying dips and de-risking amidst questions about the sustainability of the rally in semiconductor and AI-exposed stocks. However, positive second-quarter reporting season expectations for S&P 500 companies are anticipated to provide support for stocks. Trump's remarks came shortly after the US launched new strikes against Iran and revoked a waiver allowing Iranian oil sales, further escalating tensions. The President also stated that engaging with Iran was a "waste of time" while attending a NATO summit in Ankara. Brent crude had advanced $6.3% towards $79 a barrel, while 10-year US Treasury note yields rose to a one-month high of $4.58%, impacting bond prices.
Stocks of companies in the housing industry were particularly affected by worries over rising Treasury yields, which could lead to higher mortgage rates. Builders FirstSource fell $4.9%, PulteGroup dropped $4.9%, and D.R. Horton sank $4.3%. Companies with significant fuel expenses also saw declines, with American Airlines losing $3.6% and United Airlines falling $2.2%. Conversely, some influential AI stocks, such as Nvidia which rose $3.8%, and Broadcom, which climbed $5.2% after a major deal with Apple, helped offset broader market losses, highlighting their growing weight on the S&P 500.
