Morning in New York: correction gaining momentum

Daily review and forecast of events on the U.S. stock market from Mikhail Denislamov, Deputy Director of Freedom Capital Markets Research.

The dynamics of the upcoming session, as in the previous trading days, will be determined by the situation in the Middle East. News from the region remains contradictory. US President Donald Trump says that Iranian authorities have agreed on the main part of the 15-point plan proposed by the White House and negotiations are progressing well, but Tehran publicly rejects Washington's demands. Meanwhile, the Pentagon is preparing for a ground operation. In particular, plans are being discussed to seize the oil hub on Kharq Island and raids on coastal military installations near the Strait of Hormuz. The duration of the fighting is estimated at several weeks to two months. The US President's priority, according to him, is to gain control over Iranian oil, similar to the development of January events in Venezuela.

Iran continues to destroy Gulf infrastructure. An attack on a Kuwaiti power plant and desalination plant killed one worker. Aluminum production facilities in the UAE and Bahrain were damaged. Additional tension was created by the Yemeni Houthis joining the conflict by launching a rocket attack on Israel.

Macquarie analysts warned that if the blockade of the Strait of Hormuz continues until June, the oil price may reach $200 per barrel with a 40% probability. Wood Mackenzie estimates that the release of 400 million barrels of oil from strategic reserves announced by the International Energy Agency will compensate for only about four weeks of disruptions in its supply.

This Monday's macroeconomic releases include the FRB Dallas manufacturing activity index for March (February: 0.2 points). Fed Chairman Jerome Powell will speak at Harvard University. The comments of the head of the regulator are of particular importance against the background of toughening rhetoric of other Fed leaders and growing doubts about further rate cuts.

Progress Software (PRGS), Phreesia (PHR) and Inventiva (IVA ) will report after the close of major trading.

Futures on US stock indices demonstrate moderately positive dynamics. We assess the balance of risks for the upcoming session as neutral with increased volatility amid geopolitical tensions, growing inflationary pressure and prevalence of defensive positioning among traders. The fixing of S&P 500 above the level of 6400 points will be a condition for stabilization of short-term sentiment, while the breakdown of 6350 points during the session will strengthen the correctional pressure with a test of 6250-6300 area.

- Quotes of EOG Resources (EOG), Halliburton (HAL) and APA Corporation (APA) are moderately growing in extended trading due to problems with transportation of hydrocarbons in the Middle East.

- Shares of CF Industries (CF) and Mosaic (MOS) are reacting positively to the rise in urea futures, which has exceeded 50% since the start of the US-Iran conflict, as the Middle East accounts for 35-40% of global exports of the product.

- Axios reports that new models from Anthropic, OpenAI and other AI developers significantly increase the likelihood of large-scale cyberattacks and heighten concerns about so-called shadow AI. Late last week, the unveiling of Anthropic's new Claude Mythos model triggered a sell-off in the cybersecurity sector. CrowdStrike (CRWD) and Palo Alto Networks (PANW) came under pressure. This segment remains in the focus of investors' attention.

- Quotes of Palantir Technologies (PLTR) may be adversely affected by the news about the UK National Health Service studying the possibility of early termination of the contract with the company for 330 mln pounds. The reason is the growing dissatisfaction with Palantir's ties with the U.S. defense sector and the ICE immigration service.

- A US federal court has issued a 14-day restraining order halting the integration of Nexstar Media Group (NXST) and Tegna (TGNA) after DirecTV challenged the $6.2 billion deal on antitrust grounds. The merger was previously cleared by the FCC and the U.S. Department of Justice. A hearing on the preliminary injunction is scheduled for April 7.

March 27 trading on American stock exchanges ended near intraday lows amid large-scale sell-offs. S&P 500 lost 1.67%, Nasdaq 100 fell by 1.93%, Dow Jones fell by 1.72%, Russell 2000 dropped by 1.75%. All of the "Magnificent Seven" stocks closed deep in the negative.

Leading the decline in the broad market were cyclical consumer goods providers (XLY: -2.89%) and the financial sector (XLF: -2.53%). Energy (XLE: +1.69%) led the gains as it continues to be supported by a rally in oil prices. WTI gained 5.5% in Friday trading and more than 40% over the last month. Defensive sectors showed relative resilience: providers of non-cyclical consumer staples (XLP: +0.79%) and utilities (XLU: +0.57%).

The key pressure factor remains the skepticism of the investment community regarding the prospects of de-escalation of the conflict in the Middle East. The fifth week of the military operation against Iran is accompanied by growing concerns about the secondary effects of both inflation (through higher prices for energy and raw materials) and a slowdown in economic activity.

The yield on two-year Treasuries, which earlier in the session exceeded 4%, fell by 9 bps by the close. Nevertheless, the spike in bond market volatility remained one of the key negative factors for risk assets throughout the week. Additional pressure on the technology sector was exerted by news from the AI sector. The above-mentioned publication of Anthropic about the new model of Claude Mythos intensified the sell-off in shares of software developers.

Friday's macro statistics confirmed the deterioration in consumer sentiment. The University of Michigan's Consumer Confidence Index for March, the final estimate, fell to its lowest since December at 53.3 points (consensus: 54, preliminary data: 55.5). Inflation expectations at the one-year horizon rose to 3.8% from an initial 3.4%, although the five-year benchmark remained at 3.2%, signaling that consumers are not yet laying down the lasting impact of the energy shock on price dynamics.

FRB Richmond Governor Thomas Barkin noted the wide range of uncertainties that could affect both sides of the regulator's mandate, but expressed guarded optimism about inflation.

- Anthropic's information about the new Claude Mythos, which the company assures is significantly superior to the current top-tier Opus, caused quotes of CrowdStrike (CRWD: -5.9%), Palo Alto Networks (PANW: -6%), Okta (OKTA: -7.8%) and Zscaler (ZS: -5.9%) to collapse. The iShares Cybersecurity and Tech ETF corrected down 3.75%. Market expectations include the risk that next-generation models will be able to automate vulnerability detection and remediation, thus reducing the value of premium solutions from traditional providers.

- Carnival's (CCL: -4.3%) revenue and profit for the first fiscal quarter exceeded the consensus. The management of the cruise operator announced a $2.5 bln back. At the same time, the full-year guidance was revised downward due to higher fuel costs and taking into account macroeconomic risks.

- Rumble (RUM: -5.6%) CFO Brandon Alexandroff is moving to the position of strategic advisor, and his position will be taken over by Mike Masi, effective March 31.

- The US President signed an executive order to resume payment of Transportation Security Administration employees' salaries, which had been suspended during the shutdown. This will help reduce the number of large-scale delays at airports, weakening the key argument in favor of premium expedited screening services provided by Clear Secure (YOU: -11.2%).

- Brown-Forman (BF.B: +5.6%) and Pernod Ricard have confirmed that they are in merger talks in a deal described as a "merger of equals". The result could be a company with a broad brand portfolio and a balanced geographic presence.

This article was AI-translated and verified by a human editor