Morning in New York: geopolitics could deter buyers

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

Investors' attention is focused on the consequences of the US involvement in the escalation of the conflict in the Middle East. On the night of June 22, the U.S. Air Force and Navy launched strikes on strategic sites in Iran. Defense Department head Pete Hegseth called the goal of the operation the destruction of the Islamic republic's nuclear program. A complete closure of the Strait of Hormuz, a transportation artery for energy supplies from the Middle East, as a response from Tehran looks unlikely, in our view, but the movement of tankers is likely to be hampered. Against this backdrop, WTI crude oil hit a five-month high.

As for the foreign trade agenda, according to Bloomberg, the EU authorities consider the U.S. demands unbalanced and note that the unwillingness of the U.S. side to seek a compromise could lead to harsh countermeasures. The EU insists on concluding a trade agreement with the U.S. on the model of the treaty with the UK. This implies retaining some tariffs after July 9 and postponing the introduction of retaliatory measures by European partners.

Monday will see the release of preliminary business activity index (PMI) data from S&P Global. The consensus is for a decline in the manufacturing index from 52 points to 51.5, and a decline in the service index from 53.7 to 53.6. Also to be published will be the secondary housing market sales statistics for June (consensus: unchanged month-on-month), which will clarify the situation with demand after last week's report on the volume of new construction for May, which disappointed investors.

The focus will be on comments from Michelle Bowman, vice chair of the Fed's Board of Governors, and voting member Adriana Kugler.

Futures on US indices are trading in a slight plus. However, in general, before the opening of the main session, there is a moderately negative balance of risks with average volatility on the background of rebalancing of portfolios of large funds at the end of the quarter, as well as uncertainty about the development of the situation in the Middle East. Among the beneficiaries of the conflict escalation may be oil producers and protective assets, including gold. We focus on S&P 500 movements in the range of 5900-6020 points (from -1.1% to +0.9% to the closing level of June 20).

- According to Bloomberg, Apple (AAPL) is exploring the possibility of acquiring Perplexity AI to expand its AI capabilities.

- A new obesity drug developed by Novo Nordisk (NVO) has demonstrated impressive efficacy. Management announced a review of the results of the first trial of the weight-loss drug CagriSema met and presented the results of a Phase IIIB FRONTIER5 study of the anti-hemophilia drug.

- Tesla (TSLA) has launched a robotaxi service in Austin for a limited number of users. A larger-scale rollout of the service is on hold.

- BNY Mellon (BK) is in talks about a possible acquisition of Northern Trust (NTRS).

- Mitsubishi Motors (MSBHF) plans to invest $3.9 billion in solar power in the United States.

- Toyota Motors (TM) will raise prices on some vehicles for U.S. buyers by more than $200.

The trades on June 20 on the American stock exchanges were held at low turnovers and ended in different directions. S&P 500 decreased by 0.22%, Nasdaq 100 fell by 0.43%, Dow Jones added 0.08%, and Russell 2000 lost 0.17%. Under pressure were commodities (XLB: -0.68%), as well as - on media reports about potential restrictions on exports of U.S. chipmakers' products to China - IT (XLK: -0.44%) and communications (XLC: -0.61%) sectors. The worst performer in the «Magnificent Seven» was Alphabet (GOOGL: -3.85%), Apple (AAPL: +2.25%) traded better than the market. US government bond yields fell slightly across the curve. Gold remained near peak levels amid geopolitical tensions, falling only 0.7% on the day.

The June manufacturing activity index from the FRB Philadelphia remained at the May level of -4 points with a consensus of -1.5.

The focus of investors' attention was the situation in the Middle East and the uncertainty at the time about the White House's decision on the US involvement in the conflict.

Christopher Waller, a member of the Fed's Board of Governors, once again made «dovish» comments, expressing the opinion that the impact of import tariffs on the economy will be short-term and the Fed should consider the possibility to start easing monetary policy at the next meeting. At the same time, the head of FRB Richmond Thomas Barkin said that he sees no grounds for an urgent rate cut.

- Accenture (ACN: -6.9%)reported fiscal third-quarter earnings and revenue above expectations, but the company's gross margin fell short of average estimates and orders declined. At the same time, the company's own full-year forecast was raised.

- KBR (KBR: -7.3%) announced the early termination of its subsidiary HomeSafe Alliance's participation in the U.S. TRANSCOM military transportation contract. This was an unpleasant surprise for investors and put into question the prospects of the company's contract business in the U.S. public sector.

- Kroger (KR: +9.8%) first-quarter revenue was in line with mid-market expectations, while EPS and gross margin beat consensus. Management raised guidance on comparable sales (excluding fuel) and announced the closure of 60 stores over the next 18 months.

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