U.S. stocks fall amid soaring interest rates as concerns spread over ground forces deployment

03/20 U.S. stocks fall amid soaring interest rates as concerns spread over ground forces deployment

The U.S. stock market started lower as the interest rate on government bonds rose sharply after Waller, the Fed’s director, mentioned uncertainties in the stock market, led by technology stocks. In addition, uncertainties in the Middle East have increased due to the U.S. administration’s review of the occupation of Harg Island and the Pentagon’s dispatch of thousands of additional troops. In the second half of the market, the fall widened on the news that Iran completely refuses to discuss the reopening of the Strait of Hormuz. Furthermore, news that the U.S. Department of Defense is preparing for the possibility of sending ground troops also increased the decline (-0.96%, Nasdaq -2.01%; S&P 500 -1.51%; Russell 2000-2.26%; Philadelphia Semiconductor Index -2.45%)

*Variables: War, Prices and Interest Rates

Treasury yields rose sharply, stoking declines in major tech stocks, weighing on the index. This is because the U.S.-Israeli-Iran war has kept oil prices on the rise, which is sending inflationary burdens rocking changes in monetary policy. On the same day, Fed Director Waller said that caution is needed for now and that the rate cut could be delayed to later this year unless the data is supported. In particular, the rise in oil prices due to the war was temporarily observed, but the perception has changed to a prolonged one, and inflationary pressure is likely to increase. In fact, the price of gasoline in the U.S. surged 33% from $2.93 last month to $3.91 today, emerging as a key variable in the Trump administration as well as the Fed’s policy judgment

As a result of these changes, CME FedWatch has eliminated interest rate cuts this year, but rather, the FOMC in April has a 15% chance of raising interest rates. In some cases, the policy path is adjusted, with the probability of raising interest rates exceeding 50%. As a result, the possibility of a rate hike by major countries as well as the United States is raised, leading to an increase in government bond rates. As a result, while high prices are maintained, international oil prices have soared due to the attack on Iran by the U.S. and Israel, resulting in a surge in gasoline prices and stimulating inflation expectations. As a result, expectations for a rate cut, which has been one of the factors that has driven the rise of the stock market, have disappeared, and the sluggishness is progressing mainly in technology stocks.

It is uncertain whether international oil prices will stabilize immediately even if the war ends. The situation is not just a supply disruption but also a structural weakness of the global energy system, especially the blockade of the Strait of Hormuz and the lack of alternative transportation routes. In response, the International Energy Agency (IEA) evaluates it as the largest supply shock in history. In addition, the possibility of delayed supply recovery even if the war ends due to the complex damage to supply chains caused by Israel’s gas field attack, Iran’s hit energy facilities, and maritime transport disruptions. These factors increase oil price volatility, stimulate price uncertainty, increase the possibility of tightening major countries including the Fed, and act as a burden on the overall financial market

In the meantime, news has been reported that the U.S. Department of Defense is sending three more warships and thousands of Marines to the Middle East, and that it is preparing for the possibility of sending ground troops. Trump’s news came a day after emphasizing that he will not send troops to Iran on the ground, raising uncertainty that the Middle East problem is intensifying. Eventually, sending ground troops will increase the possibility of a prolonged war, which will continue to cause inflation and a surge in interest rates on government bonds, increasing volatility in the stock market.

*Featured Stocks: Semiconductors, big tech stocks fall

Semiconductors: Nvidia Falls On SuperMicrocomputer-Related Uncertainty, Surging Interest Rates
Nvidia (-3.28%) fell despite the announcement of contracts with 1 million Amazon AWS. Amid rising government bond rates increasing valuation burden across tech stocks and concerns of falling stock prices due to prosecution over the smuggling of Nvidia chips into China, the co-founder of SuperMicrocomputer. The news comes as trust-damaging and regulatory risks in the overall supply chain of AI servers have been highlighted. In addition, Nvidia’s $20 billion Groq transaction is facing the possibility of an antitrust investigation, and big tech companies are included in the CDX IG index, which introduces credit risks from investments. Most semiconductor companies, including Broadcom (-2.92%), AMD (-1.92%), and Intel (-5.00%), are down. The Philadelphia Semiconductor Index fell 2.45%.

Semiconductor Servers: Supermicrocomputer Plunges Over Export Control Violations
Super microcomputer (-33.32%) plunged after the U.S. prosecution announced that it had charged three people, including the co-founder, with violating the export control of semiconductor chips to China. Those involved smuggled Nvidia chips worth 2.5 billion dollars and Super Microcomputer announced that it has nothing to do with the company, but fell sharply. On the other hand, rival Dell (+0.58%) jumped on the possibility of benefits and returned to the market just before the close. ARM (+1.95%) rose after HSBC raised its target price to 205 dollars from 90 dollars while raising its investment rating to buy.

Semiconductor Storage: Falls As Business Peak Issues Stimulate
Micron (-4.81 percent) started higher on the news that Citigroup maintained its buying opinion and raised its target price to $510 from 430 dollars, reflecting better-than-expected performance and higher memory margins, but fell due to soaring interest rates on government bonds. In particular, the fact that the soaring margin rate is stimulating the peak issue of the second quarter is the reason for the participation in profit-taking sales. Storage companies such as SanDisk (-8.08 percent), Western Digital (-7.52 percent), and Seagate (-5.38 percent) have also fallen due to the attendance of profit-taking sales due to the rise.

Automobiles: Treasury Bond Interest Rates Up For Sale In The wake of Rising Interest Rates
Tesla (-3.24%) said it expects Dutch regulators to decide by April 10 whether to approve its fully autonomous driving system and that it could be approved across the EU this summer, but fell. The burden is that the market will remain at a simple level of expectation and will not lead to immediate earnings contributions. At the same time, soaring government bond rates will also burden tech-heavy sales. Most electric carmakers, such as Rivian (-7.51%) and Lucid (-2.33%), are also burdened by the surge in government bond rates