Morning in New York: investors expect a rebound after Friday's sell-off

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

Investors' attention at the opening of trading is centered on the next round of escalation of the conflict around Iran. The U.S. launched strikes on Kharq Island, through which about 90% of Iran's oil exports pass, but the relevant infrastructure was not damaged. White House head Donald Trump warned the adversary of possible new strikes, while saying that Tehran is ready for negotiations, but its terms are still unacceptable. The Islamic republic's foreign minister has been giving contradictory signals. On the one hand, he allowed openness to ceasefire initiatives, on the other hand, he threatened strikes on the assets of American companies in the region in case of new attacks on energy facilities.

According to Goldman Sachs, cargo transportation through the Strait of Hormuz has come to a near standstill and may take longer to resume than originally expected. The conflict continues to deepen, showing no signs of being resolved soon. Israel plans to extend its military campaign for at least three additional weeks. Washington, according to media reports, does not yet have a clear plan to open the Strait of Hormuz. Trump also questioned a meeting with Chinese leader Xi Jinping scheduled for later this month, allowing its postponement pending a clear position from Beijing on helping to unblock flows through Hormuz. Against this backdrop, bilateral economic consultations with U.S. Treasury Secretary Scott Bessent, Trade Representative Jamison Greer and Vice Premier of China's State Council He Lifeng took place, which the parties described as stable.

Today will see the release of the New York Manufacturing Index for March (consensus: 3.9 points, February: 7.1), as well as February industrial production (consensus: +0.1%, January: +0.7%) and capacity utilization (consensus: 76.2%, January: 76.2%). However, in the current environment, these releases are taking a back seat as the investment community is focused on the Iranian conflict and expectations related to the Fed meeting starting this Tuesday.

Amid the end of the reporting season, the list of releases this week is short. Dollar Tree (DLTR), VNET Group (VNET), KE Holdings (BEKE) and Forgent Power Solutions (FPS) will present their quarterly results before the opening of main trading.

The GTC conference, hosted by NVIDIA (NVDA), promises to be a major corporate event. It is expected that the main focus will be on infrastructure and computing systems for artificial intelligence, as well as the presentation of a new chip. Given NVIDIA's dominant position in the industry and its significant weighting in stock indices, we believe that positive news could support a favorable sentiment in the semiconductor and related infrastructure companies sector.

Futures on US stock indices are trading in the green zone, recovering part of Friday's losses. We assess the balance of risks for the upcoming session as neutral with increased volatility. The S&P 500 fixation above 6700 points will be a signal for improvement of forecasts of its further dynamics, and we consider the level of 6600 as a key support, near which the 200-day moving average passes.

- Shares of Meta Platforms (META) are rising amid reports that it may cut more than 20% of its workforce as part of cost optimization amid increased investment in artificial intelligence technology.

- Micron Technology (MU)'s stock could be supported after the company announced plans to build a second manufacturing facility at its recently acquired site in Taiwan. The capacity expansion reinforces the long-term investment thesis formed around the growing demand for AI memory.

- Blue Owl Capital (OWL) remains in the spotlight after Blue Owl Capital Corporation II's board of directors recommended that shareholders reject Cox and Saba's proposal, which involves a share repurchase at a significant discount to Net Asset Value (NAV). In this situation, the board's priority is to protect the interests of current investors. In general, these events can be perceived by the market as moderately positive: rejection of the deal reduces the risk of fixing the value of assets at an undervalued price.

- Quotes of Sable Offshore (SOC) add more than 6% after the U.S. Department of Energy activated the Defense Production Act to support the restart of oil production at the Santa Ynez field. Increased federal support may boost the company's investment appeal, but unresolved conflict with California authorities and legal risks create significant uncertainty.

- Celanese (CE) shares are noteworthy after announcing a price hike for high-tech materials effective April 1. The decision reflects the company's attempt to offset raw material cost pressures and maintain profitability.

March 13 trading on the U.S. stock exchanges ended in the red zone. S&P 500 decreased by 0.61%, NASDAQ 100 lost 0.62%, Dow Jones fell by 0.26%, Russell 2000 decreased by 0.36%.

The outsiders of the day were the IT sector (XLK: -0.75%) and raw materials producers (XLB: -0.99%). Utilities (XLU: +0.99%), whose defensive shares are in high demand amid uncertainty, emerged as the growth leaders.

Quotes of the Magnificent Seven closed in the negative amid general weakness in the technology sector.

The main driver of the sell-off was geopolitical tension. The prospects for resolving the Middle East conflict remain dim. Despite the military campaign of the US and Israel, the political regime in Iran remains stable, and Tehran's ability to wage asymmetric warfare makes a quick conclusion of the confrontation unlikely. The Pentagon's dispatch of a naval expeditionary unit to the Middle East only reinforces this conclusion. The Strait of Hormuz remains a key pain point. Oil production stoppages in the region continue, the settlement of the situation is likely to require a diplomatic agreement, and the organization of military escort of cargo shipments may take several more weeks. WTI oil rose another 3.3% on this background, while the price of Brent briefly exceeded $100 per barrel.

Last Friday's macroeconomic statistics reinforced the worrisome sentiment among investors. The core PCE deflator for January rose to the highest since March 2024 at 3.1% y/y, which was above market expectations. U.S. GDP growth for the fourth quarter was revised to only 0.7% vs. 1.4% in preliminary data. Consumer spending was revised downward. At the same time, the statistics on the number of new job openings JOLTS for January was better than forecast: the actual result amounted to 6.946 million. Given the macro data, the market has additionally tightened expectations of monetary policy adjustment. Now the quotes include the reduction of the Fed Funds rate by the end of the year to less than 25 bp, while on the eve of the Iranian conflict it was predicted that it will be revised twice. An additional pressure factor was the renewed trade uncertainty. The White House has initiated dozens of Section 301 investigations against trading partners including China, Mexico and the EU.

A federal judge has voided the injunctions against Fed Chairman Jerome Powell initiated by federal prosecutor Jeanine Pirro. The prosecution intends to appeal this decision, which could delay the approval process of Kevin Warsh as the new head of the Fed. Odds that he will be selected for the post by mid-M Ma have fallen to 72% on Polymarket, while the probability of a rate cut at the June FOMC meeting - the first that Warsh could hold as chairman - is estimated at 30%.

- Klarna (KLAR: +8.8%) reported that its chairman Michael Moritz bought about 3.47 million shares of the company's stock for about $50 million, while product and design director David Fok bought a stake worth about $389k.

- AdaptHealth (AHCO: +8.7%) disclosed that investor Richard Kashin bought about 2 million of its shares through One Equity Partners, bringing the fund's stake closer to 15.9 million shares.

- Lennar's (LEN: +2.6%) first-quarter revenue and earnings per share came in slightly below consensus. New orders were up 1% year-over-year, but shipments were down 5%. Guidance for the current quarter is mixed, with deliveries above average market guidance and gross margins slightly below.

- Insulet (PODD: -6.9%) has initiated a voluntary adjustment to certain lots of the Omnipod 5 medical device following the discovery of a manufacturing defect during routine product monitoring.

- The launch of Avocado AI's Meta Platforms (META: -3.8%) model has been postponed until at least Ma: in internal tests, it lost to competitors' developments. The company was considering temporary licensing of Gemini from Google to support its own products.

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