Tech stocks and other assets were showing signs of fatigue as President Trump ramped up threats on Iran.
The price of tech stocks has dropped to 21,696 and that has breached an uptrend from May. The next uptrend line has the potential to test the fibonacci levels from that low with the key ones marked above.
Stock indices dropped on Tuesday after another 4% in crude oil after Trump jumped on the Iran conflict bandwagon. After initially playing down any US involvement, the President is ramping up war talk, and the country’s lawmakers are either onboard or worried about joining another long conflict in the Middle East.
Losses in stocks continued after Trump was set to meet his national security team, leading to speculation that the country may be on the verge of joining the attack against Iran. Israel said it will intensify its attacks, while the American leader said he wants “unconditional surrender” from Iran.
Iran supplies 30% of China’s current oil supplies, according to estimates, and there is a potential that the war could engulf other world powers.
Another blow to tech stocks was concerns about stagflation, where a slowing GDP aligns with higher inflation. The latest retail sales report and a stronger-than-expected import price report added some weakness, while homebuilder sentiment slumped to a 2.5-year low.
US May retail sales fell by -0.9% for the month, which was worse than expectations of -0.6%, while May retail sales ex-autos unexpectedly fell by -0.3%.
These weaker data points may be signs of early tariff fallout, and it is also a risk if oil prices continue to move higher. Investors are now bracing for negative tariff news over the next two weeks, following President Trump’s announcement last Wednesday that he intends to send letters to many trading partners, setting unilateral tariffs ahead of the July 9 deadline from the agreed 90-day pause.
The markets this week now turn to the Federal Reserve’s 2-day meeting that ends on Wednesday, with expectations the federal funds rate will remain at 4.25%-4.50%. That may not please the President, who has been critical of the Fed’s limited rate cuts. That will make the post-event Press Conference interesting with markets now expecting 0% chances of a -25 bp rate cut this week.