The Dow Jones dipped slightly on Monday, but losses were limited because fears of an imminent and dramatic escalation between the US and Iran faded.
A cautious start to the week for the three major US stock market indices saw the Nasdaq lead the way with a 0.3% gain, while the S&P 500 rallied 0.14% ahead of the laggard Dow Jones Industrial Average.
Less than an hour before the closing bell, the Dow had lost 8.65 points or 0.03% to trade at 28,626.23. The index had plunged more than 200 points when the market opened.
Despite an almost 1% rally in the price of gold, there was not a risk-off tone in the marketplace. Instead, the rally in XAU was supported by a sell-off in the US dollar, which was catalyzed by every single European PMI beating expectations this morning, which lifted the euro and the pound.
Oil prices eased off their highs near $70 per barrel as fears about the Iran crisis took a breather.
In domestic politics, impeachment drama is threatening to zoom back onto the Dow’s radar.
John Bolton, former national security adviser to the Trump administration, has confirmed he would testify before the Senate if subpoenaed. After being booted from the president’s inner circle, Bolton allegedly referred to the infamous Ukraine call as a “drug deal.” His high standing among Republicans had previously seen the White House try and ensure he did not testify in the House.
The Dow Jones quickly lost interest in the impeachment hearings because the probability of Trump’s removal remained close to 0%. A damaging testimony from Bolton might be enough to move the needle slightly, but he is not a complete game-changer for Democrats hoping to flip the Senate. Only a couple of moderate Republicans have loosely hinted they might be on board.
While the standoff between the US and Iran has brought plenty of volatility to energy prices, the stock market has been surprisingly quiet.
Sebastian Galy at Nordea Asset Management said that restraint on the part of the US should limit the damage to equities.
The question is whether the US president wants to escalate the conflict to strangle Iran… The US already promised to target 52 sites in Iran, including cultural sites (as ISIS did in Syria to worldwide condemnation).
The odds, therefore, are that the US follows a strategy of limited retaliation. This process of tit for tat is hence likely to be faded by the markets in the next two weeks.
It was a mixed day in the Dow 30, with poor showings from a handful of crucial stocks dragging the index into the mud.
As has often been the case, the Dow’s most heavily weighted stock, Boeing (NYSE: BA), was under pressure, though it recovered to achieve a 0.12% gain.
Several issues conspired to weigh on BA stock. More technical problems with the 737 MAX have emerged. Boeing is also considering raising debt amidst the crisis.
Another central member of the Dow Jones was also under pressure as Disney (NYSE: DIS) faced a more than 1% sell-off. This weakness was not so easy to pin down but could have erupted from a high-profile loss at the Golden Globes.
Alternatively, issues over licensing have seen the removal of some major films from the Disney+ service, taking some of the shine off the stock’s impressive streaming-fueled rally last year.
Meanwhile, Apple (NASDAQ: AAPL) jumped 0.62%, inching its stock price back towards $300.
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Last modified: January 22, 2020 11:39 PM UTC