Morning in New York: external background favors continuation of correction

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

Foreign policy news and the situation in the energy market will continue to determine the dynamics of the upcoming trades. On the eve, tension in the Middle East sharply increased. Israel struck South Pars, Iran's largest gas field. In response, it attacked Qatar's Ras Laffan Industrial City, damaging the world's largest infrastructure facility for LNG exports. Against this backdrop, the oil rally continues, while increased risks to cargo transportation through the Persian Gulf and Strait of Hormuz contribute to expectations of accelerating inflation, which keeps pressure on interest rates.

Uncertainty is also heightened by statements by US President Donald Trump. In particular, the President claims that Washington did not know in advance about the strike on South Pars and opposes new attacks on this field, if Iran does not continue to destroy the Qatari energy infrastructure. At the same time, the head of the White House warned of an extremely tough response in case of a new escalation, so the market remains sensitive to any news from the Middle East.

This Thursday, March 19, the jobless claims data for the week to March 14 will be released (consensus for initial claims: 215k after 213k in the previous corresponding period). The number of second claims in the week to March 7 is forecast to remain at 1.85 million.

The FRB Philadelphia manufacturing activity index for March (consensus: 8 points, February: 16.3 points) will also be released.

In addition, January building permits (Dec: -5.4%) and new home sales (consensus: -2.7%, Dec: -1.7%) will be reported.

Alibaba Group (BABA), Accenture (ACN), Signet Jewelers (SIG), Arcos Dorados (ARCO) and Aveanna Healthcare (AVAH) will report quarterly results before the open. FedEx (FDX) and Planet Labs (PL) will report after the end of the main session.

Futures on American stock indices show a moderate decline. We assess the balance of risks for the upcoming trading session as negative with increased volatility.

- Rocket Lab (RKLB) is adding about 1.6% after signing a $190 million launch services contract for 20 hypersonic test flights of the HASTE launch vehicle as part of the U.S. Department of Defense's MACH-TB 2.0 program. The contract increased the company's total order book in the launch and space systems segments to more than $2 billion, and the number of launches in the order books exceeded 70.

- Shares of Red Cat Holdings (RCAT) are losing about 4% after the close of the main session, despite fourth-quarter revenue growth of an impressive 1985% YoY to $26.2 million, with a consensus of $23.9 million. The stock was pressured by a net loss per share of $0.17, as the market's average expectation was $0.15.

- Five Below (FIVE) shares are up about 7% after the company released its quarterly results. Revenue for the year rose 23% to about $4.8 billion, comparable sales increased 12.8%, and adjusted EPS rose 32% to $6.67. The outlook for 2026 calls for revenue in the range of $5.2-5.3 billion and EPS around $8, but tariff risks limit the potential for revaluation.

- Quotes of Micron (MU) declined by about 4% during the extended session, despite exceeding expectations on revenue and profit. Closing of long positions after the growth of shares since the beginning of the year became the main pressure factor. Additional investor wariness was caused by the increase in the capital expenditure plan for 2026 to more than $25 bln and a $10 bln YoY increase in construction spending in 2027. Exchange players put risks of cyclicality of demand for memory chips and potential oversupply into their forecasts.

- Shares of EquipmentShare (EQPT) are up about 8% after the company released its fourth-quarter results. The company's earnings per share came in at $0.24 with a consensus of $0.19, although revenue fell slightly short of the expected $1.58 billion, coming in at $1.57 billion.

March 18 trading on the U.S. stock exchanges ended near intraday lows, the growth of the beginning of the week was leveled. S&P 500 declined by 1.36%, NASDAQ 100 lost 1.43%, Dow Jones fell by 1.63%, Russell 2000 - by 1.64%.

Pressure on the quotes was exerted by the results of the Fed meeting and tougher signals in the comments of the head of the U.S. central bank Jerome Powell. Foreign policy news and the growth of treasury bond yields contributed to the activation of sell-offs.

All the companies included in the "Magnificent Seven" showed negative dynamics, which also had an unfavorable impact on stock indices.

All sectors of the S&P 500 ended the day in negative territory. The leaders of the decline were suppliers of non-cyclical (XLP: -2.43%) and cyclical (XLY: -2.31%) consumer goods, as well as producers of raw materials (XLB: -2.1%). The energy sector (XLE: -0.14%) looked the most stable due to the persistent geopolitical premium in oil prices.

The key macro factor was the outcome of the Fed meeting, at which the rate was kept at 3.5-3.75% in line with general expectations. The head of the regulator Jerome Powell noted the risks of more prolonged inflationary pressure, including taking into account the rally in energy prices. Against this backdrop, short-term bond yields rose by about 10 bp, which increased pressure on equities.

The market reacted negatively to February core PPI data, which rose 0.5% m/m against a consensus of 0.3%, with the three-month annuitized increase hitting its highest since Ma 2022.

Reports of attacks on Iran's energy infrastructure, as well as news about threats of retaliatory strikes on facilities in the Persian Gulf, including reports of a missile attack on LNG facilities in Qatar, did not add optimism to traders. Against this backdrop, concerns about the stability of energy supplies intensified, which supported the growth of oil prices and increased the activity of stock sellers.

-Microsoft (MSFT: -1.9% at the close of trading on March 18) is considering legal action against Amazon (AMZN: -2.5%) and OpenAI over the $50 billion agreement between these companies, as it contradicts existing agreements with the corporation and increases competition in the AI infrastructure segment.

-Macy's (M: +4.7%) reported fourth-quarter earnings, revenue and comparable sales above consensus despite weak traffic. The company's revenue guidance for the current fiscal year was also above average market expectations.

-Jabil (JBL: -1.4%) reported strong results for its fiscal second quarter and improved its full-year guideline. However, investors' guidance was even higher. In addition, the market was disappointed with the continuation of the margin and free cash flow forecasts.

- Williams-Sonoma (WSM: +1%) reported fourth-quarter EPS and comparable sales above consensus on revenue slightly below expectations. The quarterly dividend was raised 15.2%. Management noted a 9.8% increase in reserves, to $1.5 billion, due to tariff costs, indicating that their impact will be particularly pronounced in the first half of fiscal 2026. The company also provided a revenue guidance that is on average in line with market expectations.

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