Morning in New York: geopolitical turbulence will determine the course of trading

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

The main driver of volatility and uncertainty remains the development of the situation in the Middle East. The night before, US President Donald Trump announced the extension of the pause on strikes on Iranian energy infrastructure until April 6. According to the official version of the White House, Iran itself asked for a postponement, and in return gave permission for the passage of ten oil tankers through the Strait of Hormuz. However, the press immediately reported that Tehran had not made any such requests to Washington, and there was no independent confirmation of the statements about the tankers. The authorities of the Islamic Republic still deny the very fact of direct contacts with the United States. The information background around the conflict remains extremely unreliable. Because of this, the markets' reaction to geopolitical news is disproportionately sharp, as it is almost impossible to quickly verify the incoming data.

The macroeconomic calendar today is centered on the release of the final estimate of the University of Michigan's Consumer Sentiment Index for March (consensus: 54 points, preliminary result: 55.5 points). The downward revision to the forecast is likely due to the recent spike in gasoline prices. Weaker data could put localized pressure on consumer stocks. In addition, the Kansas City Fed's Service Sector Business Activity Index for March (previous reading: 6 points) will be released, which will provide additional insight into the health of regional businesses in the face of rising costs.

In this context, the speeches of Mary Daly, President of the Federal Reserve Bank of San Francisco, and Anna Paulson, Head of the Federal Reserve Bank of Philadelphia and member of the Federal Open Market Committee (FOMC) of the US Federal Reserve System (FRB), will become important. Investors will closely follow their comments on the impact of the energy crisis on inflation, economic growth and further plans to adjust the prime rate.

Futures on American stock indices demonstrate neutral dynamics. We assess the balance of risks for the upcoming trading session as neutral with increased volatility.

- Shares of Unity Software (U) are up nearly 15% on the premarket after posting preliminary results for the first quarter of 2026 that exceeded the company's own guidance. An additional catalyst for the rise was the decision to shut down ironSource's advertising network by April 30 and hire a financial advisor to sell the Supersonic division. The company expects these moves to drive revenue and profitability growth through its focus on Unity Vector.

- Strong report of infrastructure and engineering company Argan (AGX) caused growth of its quotations by more than 11%. The successful quarterly performance was supported by a portfolio of orders in the energy construction segment.

- Quotes of Newsmax (NMAX) before the start of the main session rose within 5%, but then slowed down, reacting to the release of annual reports. The company's revenue was at the upper limit of its own forecast. Its growth was driven by the brodcasting segment and affiliate fees. Management gave a confident outlook for 2026, pointing to the structural nature of the growth due to the expansion of distribution and re-signing of partner contracts at higher rates.

- The board's decision to pay a special dividend of $0.6 per share has caused SIGA Technologies (SIGA) stock price to soar nearly 6%.

- Zenas BioPharma (ZBIO) securities are losing nearly 10% on the premarket after announcing a $200 million convertible bond offering and 5 million common shares at $20 per unit with aggregate gross proceeds of about $300 million, which expectedly raised serious concerns about large-scale dilution of current shareholders' stakes.

Trading on March 26 on American stock exchanges, which started in the plus, ended with a sharp decline near the lows of the day. S&P 500 fell by 1.74%, NASDAQ 100 collapsed by 2.38%, Dow Jones lost 1.01%, Russell 2000 corrected by 1.7%.

The key driver of the sell-off was the return of skepticism about the de-escalation of the conflict with Iran. The same factor provoked a jump in government bond yields and oil prices. Only the energy sector (XLE: +1.57%) managed to stay on the plus side of the broad market. The list of outsiders included IT (XLK: -3.11%) and communications (XLC: -2.36%), as well as industrials (XLI: -2.32%), which are sensitive to the deteriorating economic outlook.

The correction was aggravated by the dynamics of some representatives of the "Magnificent Seven" and semiconductor manufacturers. Shares of Meta Platforms (META: -7.96% at the close of trading on March 26) were under strong pressure from negative news, which caused discussions on the market about the risks of strict regulation of bigtech.

Macroeconomic statistics pointed to the still favorable state of the labor market and the absence of a trend for mass layoffs. The number of initial applications for unemployment benefits last week in accordance with the consensus amounted to 210 thousand. The number of reapplications in mid-March unexpectedly decreased to the minimum since Ma 2024 at 1.819 million.

Stability of employment coupled with inflation risks due to rising energy prices led to a 12-14 bp rise in yields on the near and middle sections of the Treasury bond curve. An additional negative for bonds was the weak results of the auction on placement of seven-year notes for $44 bln, which was the third failure for the week. Taking into account these factors, market participants began to lay down the probability of the Fed rate hike by 17 b.p. by the end of the year, which led to a noticeable tightening of financial conditions.

- Kodiak Sciences (KOD: +74.8% at the close of trading on March 26) reported successful results from a Phase 3 GLOW2 clinical trial of its drug Zenkuda. High efficacy in the treatment of diabetic retinopathy was recorded, reducing the risk of vision-threatening complications by an impressive 85%.

- Interim data from the first phase I trial of Wave Life Sciences' (WVE: -49.6%) obesity drug WVE-007 showed an overall reduction in patient body weight by only 0.9% over six months, with a target of 2-3%. An additional disadvantage was the absence of a pronounced dependence of the clinical effect on increasing the dosage from 240 mg to 400 mg, writes Reuters.

- MillerKnoll (MLKN: -22.4%) reported poorly for its fiscal third quarter and gave a conservative outlook for the next quarterly period. The management of the furniture maker pointed to the negative impact on results of severe weather conditions, as well as macroeconomic and geopolitical pressures, noting that the current guidance does not take into account the risks of further escalation of the conflict in the Middle East, CNBC writes.

- Corebridge Financial (CRBG: +1%) and Equitable Holdings (EQH: +0.9%) announced a merger through a share swap valuing the combined entity at approximately $22 billion. The combined company will manage approximately $1.5 trillion in assets and serve over 12 million customers. Corebridge shareholders will receive about 51% of the new structure. The synergy effect is estimated at more than $500 million per year, and the deal is scheduled to close by the end of 2026.

- Brown-Forman (BF-B: +9.6%) has held preliminary talks with major French spirits producer Pernod Ricard on a merger (M&A) deal. Its terms and value were not disclosed, but the news is seen as an indicator of consolidation in an industry suffering from weakening consumer demand.

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