The three major U.S. stock indices closed lower. Crude oil prices surged accordingly, with Brent crude futures breaking through the psychological $100 mark for the first time since April 13, extending gains to 5%. WTI crude rose 5.0% intraday to $91.94 per barrel. The yield on 10-year U.S. Treasury bonds increased by 6 basis points to 4.31%, while short-term rates also rose, erasing all declines caused by last week's "reopening of the strait" rally.
As the ceasefire agreement neared its expiration, Iran stated it would not participate in negotiations on the 22nd. Oil prices surged significantly, and U.S. stocks erased early gains to close lower, with Treasury yields and the U.S. dollar strengthening simultaneously.
Meanwhile, Federal Reserve Chair candidate Kevin Warsh delivered a more hawkish-than-expected signal during a Senate hearing, prompting the market to further scale back rate cut expectations. This pushed U.S. Treasury yields higher, adding extra pressure on equities and gold.
U.S. President Trump stated that he does not intend to extend the ceasefire agreement with Iran, and the U.S. military is prepared for combat, ready to resume bombing Iran after the ceasefire expires.
During early trading, U.S. stocks once rose by 0.4%, with the S&P 500 index briefly approaching its historical high. However, following Trump’s threatening remarks, the three major U.S. stock indices quickly turned negative.
During midday trading, U.S. media reported that due to Iran’s failure to respond to the U.S. negotiation stance, Vice President Vance postponed his trip to Islamabad. Following news of Vance delaying his visit to Islamabad, all three major U.S. stock indices extended their losses and hit fresh intraday lows.
In the late trading session, according to Xinhua News Agency citing Iranian media reports on Tuesday the 21st, Naderi, a member of the Presidium of the Iranian Parliament, stated:
We will not hold a second round of negotiations until the issue of the maritime blockade is resolved.
According to Iran’s Tasnim News Agency citing insider sources, Iran will not participate in talks scheduled for Wednesday in Pakistan. Following this news, U.S. stock losses expanded, and ultimately, the three major U.S. stock indices closed lower.
After market hours, according to CCTV reports, Trump announced an extension of the ceasefire deadline, maintaining the maritime blockade while awaiting Iran’s proposal submission.
Crude oil surged intraday, with Brent crude futures breaking through the psychological threshold of $100 for the first time since April 13, extending gains to 5%. WTI crude rose 5.0% intraday, trading at $91.94 per barrel.
Thomas Martin, Senior Portfolio Manager at GLOBALT Investments, stated that there are currently two parallel logics in the market: the direction of the situation in Iran and, beyond that, the still-strong corporate earnings and economic fundamentals. He frankly remarked:
Iran is the biggest uncertainty; no one knows the outcome. And the idea that everything will turn out fine is, in my view, hard to comprehend.
Chris Zaccarelli of Northlight Asset Management stated:
Waiting for cash to be king and entering the market only after clear signals has never been a profitable strategy, but there are indeed many risks at the moment. Rashly shifting to high-risk exposure also doesn’t make sense.
Goldman Sachs warned under its equity sentiment framework that downside risks for equities remain elevated, with limited upside potential. The Middle East energy shock has worsened the business cycle outlook, and against the backdrop of valuations having somewhat recovered, the cost-effectiveness of buying the dip is low.
The Senate hearing for Fed Chair nominee Warsh added to market uncertainty.
Warsh explicitly stated that Trump had never asked him to commit to any interest rate decision and emphasized, "If confirmed, I will act independently." He also said he would "absolutely not be a mouthpiece for the president," using strong wording.
However, on monetary policy stance, Warsh's remarks made the market somewhat cautious. He pointed out that existing inflation measures are "quite imperfect" and emphasized that the cost of living is "the most pressing issue."
On the balance sheet issue, his stance was particularly clear, believing that the Fed’s holdings of long-term assets have "had a negative impact" on its policy objectives, and he does not advocate using the balance sheet as a "market backstop tool."
Steve Sosnick of Interactive Brokers pointed out that, from an equity perspective, Wash's comments imply a reduced likelihood of accommodative monetary policy. From a bond market perspective, the reduction in the balance sheet means that the Fed's holdings of long-term Treasuries will decline, exerting upward pressure on long-end yields.
The yield on the 10-year U.S. Treasury note rose by 6 basis points to 4.31% on Tuesday, with short-term rates also climbing, erasing all declines brought by last week’s "channel reopening" rally.
U.S. stocks fell in the final hour of trading on Tuesday, with the three major indices closing lower.
U.S. benchmark indices:
The S&P 500 Index closed down 0.63% at 7064.01 points.
The Dow Jones Industrial Average fell 293.18 points, or 0.59%, to close at 49149.38 points.
The Nasdaq Composite Index dropped 144.43 points, or 0.59%, to close at 24259.96 points.
Most large-cap technology stocks declined, with NVIDIA down 1.08%, Google down 1.52%, Tesla down 1.55%, Amazon up 0.66%, and Microsoft up 1.46%.
$Apple (AAPL.US)$ Apple fell 2.52% after the company announced that John Ternus would be appointed as the next CEO, succeeding Tim Cook who has led the company since 2011.
$UnitedHealth (UNH.US)$ UnitedHealth surged 7% after raising its full-year profit forecast and delivering better-than-expected first-quarter results, which helped limit losses in the Dow.
European stocks closed down about 0.9% on Tuesday, with Safran falling 6.8%, while Bayer, Airbus, and RHM each dropping more than 3%.
Pan-European stocks:
The European STOXX 600 Index closed down 0.87% at 616.03 points.
The Eurozone STOXX 50 Index closed down 0.88% at 5930.25 points, continuing its decline since 19:00 Beijing Time.
Major Stock Indexes Around the World:
The German DAX 30 Index closed down 0.60% at 24270.87 points.
The French CAC 40 Index closed down 1.14% at 8235.72 points.
The UK FTSE 100 Index closed down 1.05% at 10498.09 points.
Sector and Stock Performance:
Among blue-chip stocks in the Eurozone, Safran shares closed down 6.80%, Bayer shares fell 3.36%, Airbus dropped 3.32%, and Rheinmetall (RHM) declined 3.04%, ranking as the fourth-largest drop. TotalEnergies rose 0.83%, marking the fourth-best performance.
Among all components of the European STOXX 600 Index, Royal Unibrew closed down 24.82%, followed by Safran. Rolls-Royce fell 6.50%, ranking as the third-largest decline, while Ørsted rose 3.55%, marking the third-largest gain.
Media reports indicated that Iran has finally decided not to attend the talks scheduled for Wednesday in Pakistan. Crude oil strengthened.
Crude Oil:
Brent crude oil futures broke through the psychological threshold of $100 per barrel for the first time since April 13, with gains expanding to 5%.
The WTI May crude oil futures closed up by $2.52, or 2.81%, at $92.13 per barrel.
Middle East Abu Dhabi Murban crude oil futures rose by 2.40% to $95.27 per barrel.
Natural Gas:
The NYMEX May natural gas futures settled at $2.6970 per million British thermal units.
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Editor/Stephen