US stocks increasingly look like the want to go down and test Monday’s lows.
The S&P 500 is down 95 points, or 1.3%, to 6690, which still leaves about 50 points of breathing room before we hit the March 9 low. There is a clear inverse correlation between oil and stock markets right now that’s dominating trading. Bonds and FX are also caught in the crossfire and USD/JPY is flirting with some critical levels.
Since Monday, the market has sensed a Trump TACO trade but now the question is whether Iran is ready to quit the war so easily. They have proven they can control the Strait of Hormuz and it’s not truly clear if the navies of the world want to challenge that. In any case, they’re indicating that they won’t be prepared to protect tanker shipping until month end.
We are seeing some downside in the past few minutes on a report that Trump will suspend the Jones Act, which requires US ships move US oil. It’s a relic that’s long been lamented in some parts of the world, including Puerto Rico.
There is still an overriding belief that this war will end in the next week or two but that’s being questioned and the market doesn’t like the answers so far. It’s going to be hard for Trump to claim a victory here with Khamenei replaced by his younger, more-hardline son. Iran’s regime also appears to be unbroken.
CNBC’s Jim Cramer was on TV today calling for a massive escalation, including bombing bridges, highways and the electricity grid. Iran has already threatened to bomb similar infrastructure among its neighbours if that’s the case. Hopefully that’s not a road that anyone needs to go down but at the moment, the market is afraid of what the next major headline might be.
This article was written by Adam Button at investinglive.com.
