North America’s main indexes opened lower on Monday as a fresh escalation between the U.S. and Iran in the Gulf pushed oil prices higher and unsettled investors, while chip stocks also came under pressure.
Iran and the U.S. exchanged attacks over the weekend and Tehran said it had closed the Strait of Hormuz, a vital conduit for global energy supplies. The escalation undercuts an interim U.S.-Iran agreement signed last month that aimed to reopen the strait and end the war after 60 days of negotiations.
At 9:30 a.m. ET, the Toronto Stock Exchange’s S&P/TSX Composite Index was down 0.05 per cent at 35,287.07 points.
In New York, the Dow Jones Industrial Average rose 39.5 points, or 0.08 per cent, to 52676.53. The S&P 500 fell 27.9 points, or 0.37 per cent, to 7547.53, while the Nasdaq Composite dropped 193.3 points, or 0.74 per cent, to 26088.313 at the opening bel
Crude futures rose more than 3 per cent after investors weighed the renewed threat to the shipping route. Tech-heavy Nasdaq futures led declines, with semiconductor stocks among the biggest premarket losers.
“The escalating Iran conflict is testing whether the stock market’s broad-based growth can hold, and the market will have to balance the positive of corporate earnings strength with the negative of geopolitical risks,” said Alex Guiliano, chief investment officer at Resonate Wealth Partners.
Memory-chip makers, which have had a sharp rally this year, extended their recent pullback, with Micron Technology down 6.4 per cent, while Western Digital, Seagate and Sandisk dropped 6.9 per cent, 5.4 per cent and 8.6 per cent, respectively.
U.S.-listed shares of South Korean chipmaker SK Hynix fell 8 per cent after a blockbuster Nasdaq debut on Friday.
IShares semiconductor ETF fell 3.7 per cent.
The moves came ahead of a busy week of economic data and corporate earnings that could test the resilience of the U.S. equity rally and the health of corporate America.
The S&P 500 is up more than 10 per cent this year and less than 1 per cent below its early-June record close. The benchmark posted a second straight weekly gain last week, despite volatility in semiconductor shares and renewed U.S.-Iran tensions that put inflation risks back in focus.
Major Wall Street banks will kick off second-quarter earnings this week. Netflix, General Electric and UnitedHealth are also due to report.
S&P 500 earnings are expected to rise 23.7 per cent in the second quarter from a year earlier, according to LSEG I/B/E/S.
“Consumers are showing remarkable resilience and I would expect that bank earnings will probably do fairly well, given the current consumer environment,” said Peter Andersen, founder of Andersen Capital Management.
Investors will also parse several key economic reports, starting off with Tuesday’s U.S. consumer price index, an inflation reading that could reset expectations for the path of interest rates.
On Tuesday, Fed Chair Kevin Warsh is expected to deliver his first monetary policy testimony before Congress. Fed Governor Christopher Waller is scheduled to speak later on Monday on the economic outlook.
Markets are pricing in at least one 25-basis-point rate hike by year-end, according to LSEG data.
Elsewhere, at midday in Europe, Germany’s DAX added 0.2 per cent, as did the CAC 40 in Paris. Britain’s FTSE 100 was unchanged.
In Asian trading, Tokyo’s Nikkei 225 index lost 1.9 per cent to 67,242.73, while in Seoul, the Kospi declined 9 per cent to 6,806.93. It’s now at its lowest level since early May.
Shares in South Korean memory chipmaker SK Hynix, which soared 13 per cent in their debut Friday on Wall Street, slumped 15.4 per cent in Seoul. Its bigger rival Samsung Electronics sank 10.7 per cent.
Hong Kong’s Hang Seng edged 0.2 per cent higher, to 24,212.36, and the Shanghai Composite index shed 2.1 per cent to 3,913.79.
In Australia, the S&P/ASX 200 was nearly unchanged at 8,808.50.
Reuters and The Associated Press