04/21 U.S. stocks fall on hawkish comments from Kevin Wash and uncertainty over U.S.-Iran deal
The U.S. stock market started higher due to the influx of strong retail sales results and expectations for companies’ performance despite the uncertainties related to the U.S.-Iran negotiations. However, after Kevin Wash’s hawkish remarks, the market began to open for sale, and news of the delay in departure of the U.S.-Iran negotiation delegation fell. In the second half of the market, the drop was reduced due to reports that it received a signal to prepare for the end of the blockade of Iranian ports, but the volatility expanded again due to the news of Vice President Vance’s cancellation of the trip to Pakistan (-0.59% Dow, -0.59%, Nasdaq -0.59%, S&P 500 -0.63%, Russell 2000 -1.00%, Philadelphia Semiconductor Index +0.50%)
*Variants: U.S.-Iran, Retail Sales, Kevin Wash Hearings Interpret
Uncertainty surrounding the second round of ceasefire negotiations between the U.S. and Iran has increased. President Trump said negotiations will resume in Pakistan, but Iran has not even made a final decision on whether to send a delegation, and Vice President Vance, who leads the U.S. negotiation team, has also postponed his departure. In particular, since the recent U.S. attack on Iranian ships, Iran has raised strong questions about the authenticity of the U.S. negotiations, and the Iranian Foreign Ministry strongly protested the capture of the merchant ship, calling it a maritime piracy and a state terror attack. There have also been reports that the U.S. Department of Defense is also discussing military operations
The chairman of the Iranian parliament also mentioned on the previous day that he would not accept negotiations under threat, saying that he would not accept negotiations under the U.S. blockade and military pressure. As a result, expectations for a cease-fire agreement have weakened. Amid this development, some news of the lifting of the U.S. blockade has been reported, but volatility has increased due to mixed news of Vice President Vance cancellation of his trip to Pakistan. However, after the market closed, U.S. President Trump announced that he would extend the ceasefire. In response, it is positive that the end of the ceasefire and the possibility of military operations have been resolved, which the market is concerned about
U.S. retail sales rose 1.7 percent month-on-month in March, exceeding market expectations (+1.4 percent). This means that sales at gas stations surged 15.5 percent month-on-month due to soaring international oil prices, but retail sales at Control Group also rose 0.7 percent. In particular, disposable income increased by about $37 billion year-on-year in tax refunds related to the Budget Adjustment Act, offsetting the additional energy burden of about $8 billion, which was increased by rising oil prices. As a result, households (+2.2%), online sales (+1.0%), and general merchandise stores (+1.0%) also improved.
However, if you look at the details, the quality of consumption is somewhat mixed. Food prices, which show service consumption, increased only 0.1%, indicating that consumption is concentrating on purchasing goods and essential consumption. Furthermore, card usage data in early April also showed signs of a slowdown. After all, this retail sales show that U.S. consumption remains strong, but as tax refunds and temporary price factors, if the oil price burden continues, real consumption is likely to shrink. This could stimulate economic instability, so attention is paid to whether high gasoline prices will be maintained in the future
At the confirmation hearing, Fed Chairman-designate Kevin Warsh called the current high price situation a past policy failure of the Fed, referring to sweeping reforms in the monetary policy framework and communication methods. In particular, he criticized the large balance sheet as favorable to financial asset owners, emphasizing progressive asset reduction and interest rate-oriented policy management, and announced that he would push for data evaluation projects through public-private cooperation to establish a new indicator system that accurately reflects actual perceived prices. He also argued that AI technology will fundamentally change the economic structure and insisted on a review of existing risk models, while presenting the Fed’s independence and restoration of trust based on data as a top priority
On the financial market side, Wash’s remarks suggest an acceleration of the balance sheet reduction (QT) and a policy return centered on interest rates, which is likely to increase the volatility of risk assets that have relied on the liquidity market. After Wash’s remarks, the U.S. stock market opens for sale and turns downward. In particular, the announcement of a complete overhaul of the existing inflation framework and the introduction of new data standards raised uncertainty. This can be interpreted as a sign that it may take a more hawkish stance to stabilize prices in the future. Wash’s remarks eventually resulted in the stabilization of currency value (strong dollar), hawkish moves (rising interest rates), and the end of the era of quantitative easing (slow stock market)
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Semiconductors: Nvidia down Vs. AMD up
Nvidia (-1.08%) fell due to intensifying competition in inference-type chips such as Trenew due to Google’s expansion of TPU and Amazon’s 10-year partnership with Antropic. In addition, the inflow of supply and demand, which had shifted from the previous day’s massive options trading, also contributed to the decline. AMD (+3.47%) rose as funds flowed in due to Nvidia alternative effects. Broadcom (+0.64%) recently showed sluggish performance in Google’s negotiations with Marvell Tech (+2.35%), but today it rebounded. Intel (+0.85%) rose on the news that its guidance is expected to be solid, although there will be a slowdown in sales in its target day earnings report. The market is expected to pay attention to the ability to expand chip production to meet demand for AI-related services in the latest earnings. The Philadelphia Semiconductor Index rose 0.50%
Semiconductor storage, power semiconductors: Power semiconductors continue to rise
Micron (+0.21%) rose as expectations flowed in ahead of SK Hynix’s earnings announcement on the 23rd. However, the attendance for profit-taking is still ongoing. SanDisk (-1.04%) is also on the decline as it digests for sale. On the other hand, Western Digital (+2.59%) and Seagate (+3.73%) continue to announce an upward revision of their targets, which continues to rise in hardware. In the end, hardware-oriented storage companies such as hard-oriented storage companies tend to expand their strength rather than chip-oriented ones. Power semiconductor companies, which have recently shown strong performance, are still on the rise, with On Semi (+1.58%) and Monolosic Power (+2.49%). However, Analog Devices (-1.52%) are on the decline due to the opening of the sale
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