U.S. Stocks Pressured by Geopolitical Events

U.S. equity markets were under pressure on Monday as traders reacted to backlash against President Donald Trump and his new immigration policy. The sell-off was across the board, affecting all major indices, and represented the worst performance of the year. Essentially, it was a risk-off day from the start since the selling started in Asia, moved to Europe then continued in the U.S.

The Dow Jones Industrial Average was down as much as 220 point. The S&P 500 Index dropped about 0.5 percent and the NASDAQ was down about 0.8 percent.

Economic News

In economic news, U.S. Pending Home Sales for December rose 1.6 percent, equaling the forecast. In November, pending home sales dropped 2.5%.

Core PCE Price Index came in at 0.1%, better than the previous report, but equaling the forecast. Personal Spending came in better-than-expected at 0.5%, better than the 0.4% estimate, and well above the 0.2% gain reported last month. Personal Income came in slightly lower than expected at 0.3%, but better than the previous that was revised upward to 0.1%.

Crude Oil

U.S. West Texas Intermediate and international crude oil futures were under pressure on Monday in reaction to another increase in U.S. drilling activity. Traders sold crude oil in response to Friday’s report from oil field services firm Baker Hughes, which showed another increase in the number of operating rigs.

Traders were also reacting to the news that members have cut production by only 900,000 barrels per day. Late last week, news was circulating that as many as 1.3 million barrels had been cut from production. This represents only 50% of the 1.8 million barrels per day pledged OPEC/non-OPEC members.

Gold

April Comex Gold futures traded higher on Monday as political uncertainty in the U.S. drove investors in the safe haven commodity. Money also poured out of U.S. stock indices and into gold as a hedge against further losses. The rally was likely held back by light volume due to the Chinese Lunar holiday.

Today’s price action was driven by geopolitical events, but over the long-run, gold’s direction will be largely influenced by U.S. monetary policy. Investors will learn more about this later in the week when the Fed releases its first monetary policy statement of the year. Investors may also find out more about the timing of the Fed’s next rate hike, which the market has pegged as June.