US Stock Market Overview – Stocks Drop on US Airstrike of Iranian Military Leader

 

US stocks were under pressure on Friday following President Trump’s decision to order an airstrike that killed a powerful Iranian military leader. The preemptive action put pressure on riskier assets as Tehran vowed to avenge the death of General Qassem Soleimani. The action is likely just the beginning of geopolitical tensions that will escalate in the region. Oil prices surged higher buoying energy shares, while gold prices hit a fresh 4-month high. US yields moved lower on Friday, following a softer than expected ISM manufacturing report. Most sectors in the S&P 500 index were lower, driven down by Materials, real-estate bucked the trend in a down tape.

Tension in the Gulf are Rising

President Donald Trump said Friday that America does not seek war or regime change with Iran, following an airstrike that killed the country’s top general, Qasem Soleimani. Tensions in the Gulf region escalated with Tehran vowing to avenge the death of General Soleimani and its allies in Iraq pressing to expel US troops from the country. Iraqi Prime Minister Adel Abdul-Mahdi condemned the overnight strike, calling it a flagrant breach of the terms underwriting the presence of US forces in the country. The strike also killed Abu Mahdi al-Mohandes, the deputy head of the Popular Mobilization Forces, which is an umbrella for dozens of militias that are part of the Iraqi security apparatus but include factions that swear allegiance to Iran’s supreme leader.

Manufacturing Activity Drops to 10-year Lows

Manufacturing activity continued to falter in December according to the Institute for Supply Management. ISM reported that its manufacturing index fell in December to 47.2. That’s its lowest level since June 2009, when it hit 46.3. Expectations had been for a reading of 49 for December. December also marked the fifth straight month of contraction for the U.S. manufacturing sector. New orders in the manufacturing sector dropped 0.4 percentage point in December to 46.8, down from a November reading of 47.2. Employment, order backlogs and inventories also fell last month while prices rose.