New York Morning: Wall Street remains under the pressure of geopolitics

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

The market is focused on the unfolding armed conflict in the Middle East. Due to the actual blockage of the Strait of Hormuz, a key route for oil exports, Saudi Arabia's oil storage facilities are rapidly filling up, leading to an increase in energy prices. Statements by U.S. President Donald Trump about his readiness to help ensure the transportation of hydrocarbons through the strait provided temporary support for stock indices. At the same time, the White House head's threat to end trade relations with Spain after Madrid's refusal to grant access to military bases for the operation against Iran increased the general tension. The Spanish side insists on the need to comply with international trade agreements, which also contributes to uncertainty.

Today will be published a block of data on the services sector and labor market, which will largely determine market sentiment. The number of employed from ADP in February is expected at 50 thousand after January 22 thousand. Exceeding the forecast will confirm the stability of hiring and give the Fed an additional argument in favor of maintaining tight monetary conditions. The consensus for the ISM Services Business Activity Index suggests a decline from January's 53.8 points to 53.5. Freedom Broker's benchmark suggests normalization of the index in the range of 53.3-53.8 points. A positive surprise would indicate a continuation of the uptrend, while weaker than expected data will likely be ignored by the market. The final estimate of the service PMI (business activity index) from S&P Global Services will, in our view, reflect its stabilization in the range of 52.3-52.7 points after the preliminary 52.3.

An important addition to the macroeconomic picture will be the publication of the Fed's Beige Book. It is expected that the report will confirm the persistence of upward pressure on prices with a moderate assessment of business activity, which will signal the preservation of current monetary conditions at the March meeting. The armed conflict with Iran puts the US Fed in a difficult position: the regulator will have to choose between fighting the inflationary shock from expensive oil and pressure from President Trump to cut rates amid record tariff hikes.

Before the open , Wix (WIX), Dycom (DY), Abercrombie & Fitch (ANF), Brown-Forman (BF.B), Bath & Body Works (BBWI), Genius Sports (GENI) and EyePoint (EYPT ) will report results. Following the main session , Broadcom (AVGO), Rigetti Computing (RGTI), Veeva Systems (VEEV), Okta (OKTA), American Eagle (AEO), Webull (BULL) and StubHub (STUB ) will present results.

Futures on American stock indices, as well as Japanese Nikkei 225 and German DAX show negative dynamics. We assess the balance of risks for the upcoming session as negative with increased volatility. The main pressure factor is the escalation of the conflict with Iran and the closure of the key export route through the Strait of Hormuz, which poses a threat to global stability.

- Moderna (MRNA) is up more than 5% on news that it has settled a long-running patent dispute with Arbutus and Genevant. The payment of $950 million for the use of nanoparticle technology in vaccines removes significant legal uncertainty and risks larger settlements in the future.

- GitLab (GTLB) shares, despite strong reporting, are losing about 8% in the premarket due to a conservative outlook for fiscal 2027, which analysts attribute to increased competition in the AI-enabled software development tools segment.

- Shares of Box (BOX) are adding more than 6% in extended trading thanks to strong reporting and a guidance that was above the Wall Street consensus. The cloud service provider reported adjusted earnings per share of $0.49 versus estimates of $0.34, while revenue reached $305 million.

- Quotes of Indie Semiconductor (INDI) collapsed by more than 12% after the announcement of a private placement of convertible bonds worth $150 mln. The news caused investors' concerns about dilution of shares of current shareholders and increasing debt burden amid difficult conditions in the sector.

- AnaptysBio (ANAB), which revealed plans to split its business and create a separate company from its biopharmaceutical business in the second quarter of 2026, gains about 4% in the premarket. The market is positive on the potential for royalties from Jemperli and the publication of important trial data for ANB033 at the end of the year.

March 3 trading on the U.S. stock exchanges ended in negative territory. S&P 500 lost 0.94%, NASDAQ 100 decreased by 1.09%, Dow Jones fell by 0.83%, and Russell 2000 corrected by 1.79%.

Pressure on risk assets is exerted by escalating conflict in the Middle East and volatility in energy prices.

The dynamics of the "Magnificent Seven" stocks was heterogeneous: Alphabet (GOOGL: -0.96%) and Tesla (TSLA: -2.7%) pulled the indices down, while Microsoft (MSFT: +1.35%) kept the general correction movement in check. The communications sector ( XLC : +0.08%) closed the session in a symbolic plus on the back of Pinterest news ( PINS: +9.27% at the close on March 3 ). The outsiders were raw materials suppliers (XLB: -2.46%), which suffered from a sharp drop in gold (-3.5%) and silver (-6.1%) prices.

The market reacted nervously to reports of drone attacks on the US embassies in Saudi Arabia and Kuwait, as well as the expansion of the conflict zone. WTI crude oil rose 4.7% to $75 per barrel, adding to fears of accelerating inflation. The mentioned statement of Washington about the possibility of military escort of tankers in the Strait of Hormuz allowed stock exchange benchmarks to recover from daily lows, and the VIX volatility index to retreat from the peak of 28 points to 22.

The rhetoric of the Fed representatives additionally increased the caution of the traders. Head of FRB Minneapolis Neel Kashkari recognized that the conflict with Iran may slow down the process of disinflation and force the regulator to act even more cautiously. Jeff Schmid, Chairman of the Federal Reserve Bank of Kansas City, noted that five years of inflation remaining above the inflation target does not give reasons for reassurance and easing of monetary policy.

In the focus of attention of stock exchange players were strong reports of retailers and expectations of publication of ISM index of business activity in the service sector.

- Ziff Davis (ZD: +48% at the close of trading on March 3) has entered into an agreement to transfer its Connectivity division to ACN for $1.2 billion in cash, providing the company with a significant liquidity resource for further investment.

- Best Buy (BBY: +7.1%) reported weak fourth-quarter comparable sales results, but investors were more concerned with gross margin improvement and effective cost control, which offset a conservative full-year guidance.

- Target (TGT: +6.7%) posted a strong quarterly report and gave an optimistic outlook for fiscal 2027. In addition, the retailer's management announced a recovery in consumer activity in February.

- On Holding (ONON: -6.1%) reported record gross margins and continued brand growth, but also reported a 900 bps negative foreign exchange impact. Against this backdrop, the company's own revenue forecast for 2026 was below average Wall Street expectations.

- Archer Aviation (ACHR: -10.6%) reported a quarterly loss that beat consensus. The company's plans to expand its Midnight fleet heightened analysts' concerns about the high rate of cash expended on its path to commercialization.

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