U.S. equities extended their declines on Friday as Wall Street wrapped up its fifth consecutive week of losses, marking the lengthiest downward trend in nearly four years. The S&P 500 dropped by 1.7%, marking its worst weekly performance since the onset of the conflict with Iran. Concurrently, the Dow Jones Industrial Average plummeted by 793 points, or 1.7%, sliding more than 10% from its previous peak recorded last month, while the Nasdaq composite dipped by 2.1%.
The Dow’s descent officially categorizes it as the latest prominent index to confirm a correction, defined as a 10% decrease from a prior high. Following suit, the Nasdaq breached the correction threshold a day earlier.
This week, the U.S. stock market deviated from its fluctuating trend, swaying between gains and losses daily, influenced by fluctuating optimism about a potential resolution to the conflict. Conversely, in Canada, the primary stock index closed marginally higher, buoyed by advancements in the basic materials segment. The S&P/TSX composite index concluded with a gain of 73.13 points at 31,960.65.
Shortly after the conclusion of a challenging trading day on Thursday, U.S. President Donald Trump introduced a possible ray of hope by extending the deadline for Iran’s power plants’ obliteration to April 6. This extension was contingent on Iran permitting oil tankers to resume their passage from the Persian Gulf through the Strait of Hormuz to the open sea. Following Trump’s announcement, oil prices briefly receded, hinting at a potential return to stability in the Strait of Hormuz. However, oil prices resumed their ascent as trading shifted from Asia to Europe and back to Wall Street.
Despite Trump’s subsequent delay announcement, hostilities persisted in the Middle East, with Iran showing no signs of retreat while Israel threatened to intensify its assaults on Iran.
“The conflicting diplomatic signals between the U.S. and Iran left investors disheartened this week,” mentioned Doug Beath, global equity strategist at Wells Fargo Investment Institute. “By week’s end, market risk appetite faltered amidst the fog of war.”
Amidst market concerns of prolonged disruptions to oil and natural gas production and transport in the Persian Gulf, fears of a significant inflationary impact on the global economy loom large. The potential scarcity of oil and gas could lead to elevated fuel prices for consumers, prompting businesses reliant on transportation to elevate their prices as well.
If the conflict persists until the end of June, analysts at Macquarie project that oil prices could skyrocket to $200 per barrel, setting a new record.
On Wall Street, a majority of stocks saw declines, with three out of every four companies in the S&P 500 experiencing losses. Notably, prominent tech stocks, such as Amazon, Meta Platforms, and Nvidia, weighed heavily on the market. Non-essential goods sellers faced substantial drops, with Norwegian Cruise Line Holdings, Starbucks, and Chipotle Mexican Grill all witnessing significant declines.
Overseas, European markets saw declines following mixed results in Asia. In the bond market, Treasury yields exhibited volatility, with the 10-year Treasury yield hitting 4.48% before retracting to 4.43%. This uptick in yields has already led to increased rates for mortgages and other loans, potentially hampering economic growth.
The surge in Treasury yields and bond market disturbances were key factors cited by Trump a year earlier when he retracted initial tariff threats amid market turmoil, a move that critics dubbed as a sign of retreat in the face of financial distress.