05/21 U.S. stocks end higher after fluctuating on media reports surrounding Iran

The U.S. stock market started lower after Nvidia (-1.77%) and Walmart (-7.27%) showed sluggish performance after the announcement of earnings. On top of that, uncertainties surrounding the U.S.-Iran deal continued to decline. In particular, Iran’s denial of its refusal to send uranium to Iran has fluctuated. In the second half of the market, the agreement was drafted through the media in the Middle East and is expected to be officially announced within a few hours, which led to a shift in interest rates. Before the market closed, the market reacted sensitively to media reports surrounding Iran, such as a drop in the news of Iranian President’s remarks and Pakistan’s Army Chief of Staff’s visit to the U.S., and eventually closed higher (Dow +0.55%, Nasdaq +0.09%, S&P 500 +0.17%, Russell 2000 +0.93%, Philadelphia Semiconductor Index +1.28%)

*Variants: Confusion in media coverage around Iran, U.S. consumer unrest

U.S. media reported that the army chief of Pakistan would visit Iran on Friday to announce the final agreement and mentioned that Trump’s peace negotiations have entered the final stage. However, the commander-in-chief of the Revolutionary Guard said the report was not true. Again today, international oil prices rose sharply on the news that Iran’s supreme leader ordered a ban on uranium exports, but the Iranian government denied the report that it gave related orders during the day.

On top of that, the stock market turned upward as the Middle East media reported that five major agreements were drafted between the U.S. and Iran and that they would be officially announced within a few hours. The key provisions include 1) immediate ceasefire, 2) complete ban on mutual infrastructure attacks, 3) joint monitoring of the Strait of Hormuz and the guarantee of freedom of navigation in the Persian Gulf, 4) gradual lifting of sanctions against Iran, and 5) the start of negotiations on unresolved issues (nuclear, compensation, etc.) within seven days. In particular, although there are wide differences of opinion on the issue of nuclear weapons and compensation, it is positive that the government will make efforts to resolve the issue through gradual negotiations rather than collapse of negotiations.

However, there were reports that the Iranian president would not back down from the negotiations, and that the Pakistani army chief would not go to Iran today. As a result, the stock market digested the market and turned downward. Since then, the Middle East media have reported against the same issue, and the market is sensitive to related information. This is because the market is paying keen attention and changes in interest rates of government bonds, which will determine the future direction of the market, are fluctuating according to related news. In addition, the market has no choice but to pay attention to related issues due to economic instability caused by soaring gasoline prices. Immediately before the market closed, the market ended higher on reports that differences of opinion had narrowed, citing high-ranking Iranian officials

Meanwhile, Walmart (-7.27 percent) announced its earnings, but it fell sharply due to the fact that it increased anxiety about its future outlook despite its solid earnings announcement. Walmart shows that the U.S. retail sales market has entered a phase where consumers’ financial stress is in full swing due to prolonged high prices and rising oil prices. In particular, it warns that consumption could shrink further in the future as the effects of stimulus measures such as tax refunds disappear at the beginning of the year. In fact, low-income consumers are extremely sensitive to the budget, and noticeable consumption-saving behavior has been observed, with gas per hour falling below 10 gallons for the first time since 2022 when visiting the station. It also noted that overall retail price inflationary pressures, including groceries, could rise again in the second and second half of the year, causing a slump in the consumer market

As a result, U.S. consumers are showing a thoroughly rational consumption pattern, but they are moving to Walmart’s own brand (PB products) and price reduction (rollback) products, and they are strongly responding to ultra-low-priced necessities such as bundled products under $5 (Walmart). After all, Walmart’s earnings report suggests that U.S. retail sales in the first quarter were largely attributed to tax benefits, but will shrink after the second quarter due to high prices and soaring gasoline prices. If U.S. consumption shrinks, it is necessary to pay attention to economic indicators because uncertainties in the second half of the year could increase and uncertainties in risky assets could increase.

*Featured Stocks: Micron, SanDisk, Quantum Computers Higher Vs. Nvidia, Walmart Slump

Semiconductors: Nvidia Falls As Profit-Making Sales Open
Nvidia (-1.77%) fell despite significantly exceeding expectations and the announcement of $80 billion worth of treasury stock purchases. The burden is that short-term profit-taking sales were held due to expectations of earnings reflected in stock prices and technology stocks were held due to rising interest rates on government bonds. In particular, rising interest rates on government bonds could constrain hyperscalers’ capital expenditures. Although the fall was reduced in the late market due to reports on the U.S.-Iran negotiations, the decline continued. Of course, most investment companies recommended raising target stock prices and buying low prices, but the rise and fall in the early market were limited, and the sale continued to be digested. The Philadelphia Semiconductor Index rose 1.28%

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