Morning in New York: Investors focus on escalation in the Middle East

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

The situation in the Middle East deteriorated sharply again over the weekend. On Friday, for the first time since the 50-day blockade was imposed, more than ten tankers, including several sub-sanctioned tankers, were allowed through the Strait of Hormuz, which made market participants optimistic. However, the very next day Iran banned the movement of commercial traffic along this route, opening fire on several vessels. On Sunday, the US destroyer USS Spruance fired on and disabled the Iranian cargo ship Touska in the Gulf of Oman, which was then seized by the US Marines. Donald Trump has renewed threats to strike all of Iran's power plants and bridges if Tehran refuses to accept the terms of a peace deal.

Against this background, the prospects for the second round of peace talks in Islamabad remain uncertain. Iran refused to continue the dialog due to the ongoing naval blockade. Deputy Foreign Minister of the Islamic Republic Saeed Khatibzadeh said that Tehran is not ready to transfer enriched uranium stockpiles to the United States and demands the lifting of sanctions. The White House is strongly opposed to these conditions. The current cease-fire agreement expires on April 22. The risk of resumption of hostilities in the coming days remains very high. Against this background, oil quotations show a sharp rise. All these factors together increase inflation risks and limit the space for easing the Fed's monetary policy.

There are no macro publications important for market participants scheduled for this Monday.

Cleveland-Cliffs (CLF) and Dynex Capital (DX) will report quarterly results before the opening of the main session. Steel Dynamics (STLD), AGNC Investment (AGNC), Alaska Air Group (ALK), Zions Bancorporation (ZION) and Wintrust Financial (WTFC) will report after the close of trading.

Futures on American stock indices demonstrate downward dynamics. We assess the balance of risks for the upcoming session as negative with increased volatility amid the escalation of the conflict in the Middle East, a new jump in oil prices and strengthening inflation expectations.

- Shares of Fermi (FRMI) plunged about 20% in after-hours trading on April 17 on news of Toby Neugebauer's abrupt resignation as CEO. The interim CEO's office was led by chief operating officer Hakobo Ortiz and nab board representative Anna Bofa. The search for a permanent CEO has already begun, and details may be revealed on April 20.

- AEVEX (AVEX) securities rose by more than 20% in extended trading. During the main session on the IPO day quotations added about 35%, which reflected the high demand of institutional investors in the segment of defense technologies.

- Eli Lilly (LLY) is in advanced talks to acquire privately held biotech company Kelonia Therapeutics for more than $2 billion. The deal could be announced as early as Monday. Kelonia specializes in developing CAR-T therapies that simplify the process of modifying immune cells to fight cancer.

- Meta Platforms (META) plans to reduce its global workforce by about 10% on May 20, resulting in the layoff of about 8,000 people. Another stage of staff optimization is planned for the second half of the year. For Meta, this will be the largest restructuring since 2022-2023, when the company laid off about 21 thousand people.

- American Airlines (AAL) has publicly stated that it is not interested in a merger with United Airlines (UAL) and has not discussed its potential terms. The carrier's management emphasized that such a deal would be contrary to the interests of competition and consumers.

- Alphabet (GOOGL) is in talks with Marvell Technology (MRVL) to develop two new chips to work more efficiently with AI models. One of the chips is a memory processing unit designed to work with Google's Tensor Processing Unit (TPU), while the other refers to a new generation of TPU optimized for AI models. Marvell shares are adding more than 6% in the premarket, signaling a positive investor reaction to a partnership with a key hyperscaler.

- QXO (QXO) announced that it will acquire TopBuild Corp (BLD) for $505 per share, or about $17 billion in aggregate. The deal will form one of the largest distributors of building materials.

- The White House held a meeting with Anthropic CEO Dario Amodei, with Treasury Secretary Scott Bessent and Chief of Staff Suzy Wiles in attendance. The talks took place against the backdrop of Anthropic's legal dispute with the Department of Defense and the recent release of the Claude Mythos model.

April 17 trading on American stock exchanges ended in a steady plus. S&P 500 added 1.2%, NASDAQ 100 rose by 1.29%, ending 13 consecutive sessions in the positive territory, which was the longest rally since 1992. The Dow Jones gained 1.79% and the Russell 2000 rose 2.11%.

Shares of the "Magnificent Seven" traded in the green zone. The strongest positive dynamics were demonstrated by Tesla (TSLA: +3.01%) and Apple (AAPL: +2.59%), which was supported by data on the increase in iPhone shipments to China by 20% YoY in the first quarter.

Cyclical consumer goods producers (XLY: +2.36%) and industrial companies (XLI: +1.87%) were the leaders of growth in the broad market, reflecting the market's bet on the stability of consumer demand and the removal of part of the geopolitical premium. The energy sector (XLE: -2.76%) was the outsider amid the collapse in oil prices. WTI lost 9.4% during the session amid overestimation of risks of supply disruptions through the Strait of Hormuz.

The main positive drivers were reports of progress in negotiations between the US and Iran, including the possible opening of the Strait of Hormuz. According to Goldman Sachs estimates, CTA-funds purchased $86 bln worth of risk assets during the week (one of the five largest volumes in history) and are expected to buy another $70 bln over the next five sessions. The strengthening of risk demand was supported by a 5-8 bps decline in Treasury bond yields, as well as positive news on demand and capital expenditures in the AI segment.

Head of FRB San Francisco Mary Daly said that the regulator continues to monitor the development of macroeconomic situation. Member of the Board of Governors of the Fed Christopher Waller allowed the rate to remain unchanged if inflation risks outweigh the risks to the labor market. Gold and silver ended the day up 1.5% and 4% respectively.

- Ally Financial (ALLY: +8.1%) reported above consensus earnings for its most recent quarter, while its revenue fell slightly short of average forecasts. The company recorded a record volume of consumer filings and noted positive trends in lending despite a decline in industry sales.

- Autoliv's (ALV: +6.8%) organic sales growth was stronger than expected. Analysts noted the effectiveness of measures to maintain margins amid pressure from commodity prices and tariffs.

- State Street (STT: +2.5%) outperformed consensus on quarterly revenue, net interest income and net interest margin, and fee income, which rose on higher average stock index levels and positive net inflows.

- Fifth Third Bancorp's (FITB: +1.7%) earnings and net interest margin exceeded average market guidance in the quarter, but non-interest expense and deposit growth disappointed investors.

- Badger Meter (BMI: -24.1%) reported revenue and earnings below expectations. Its sales in the utilities segment came under pressure due to shifts in project timelines and lower municipal orders. For 2026, management forecasts revenue at the same level as the previous year. The acquisition of the UK-based UDlive for $100 mln was also announced.

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