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Stock index futures were sharply lower Friday after a U.S. airstrike in Baghdad killed a top Iranian military commander and stoked fears of an escalating conflict in the Middle East.
What’s driving the market?
Futures on the Dow Jones Industrial Average YMH20, -1.00% dropped 286 points, or 1%, to 28,555, while S&P 500 futures ESH20, -1.13% declined 36.50 points, or 1.1% to 3,223.50. Nasdaq-100 futures NQH20, -1.38% were off 115.25 points, or 1.3%, at 8,776.50.
See: Oil prices skyrocket, stock futures sink after top Iranian general killed by U.S. airstrike
The investor flight from risky assets toward traditional havens, including gold and U.S. Treasurys, stood in contrast to market action on Thursday, which saw all three major U.S. stock indexes post strong gains to end the first trading session of 2020 at records.
The Dow DJIA, +1.16% on Thursday advanced 330.36 points, or 1.2%, to end at 28,868.80, while the S&P 500 SPX, +0.84% rose 27.07 points, or 0.8%, to close at 3,257.85. The Nasdaq Composite COMP, +1.33% jumped 119.58 points, or 1.3%, to end at 9,092.19.
What’s driving the market?
The Pentagon confirmed late Thursday that the U.S. military had killed Qasem Solemaini, the head of Iran’s Islamic Revolutionary Guard Corps — Quds Force, and said the strike was aimed at deterring future Iranian attacks. Iran’s supreme leader, Ayatollah Ali Khamenei, declared three days of mourning for Solemaini’s death and said that a “hard revenge awaits criminals.”
“It’s never likely to be good news for the markets when ‘World War III’ is trending on Twitter,” said Russ Mould, investment director at U.K. wealth manager AJ Bell, in a note. “It is therefore hardly a surprise to see yesterday’s positive start to 2020 for stocks come to an abrupt end after U.S. airstrikes on Baghdad airport killed top Iranian general Qasem Soleimani.”
“What happens next for equities will depend on what form Iran’s promised ‘severe revenge’ takes and how nations which are more friendly to it, like China and Russia, respond,” Mould said.
Oil futures jumped, with global benchmark Brent crude BRNH20, +3.80% and U.S. benchmark West Texas Intermediate crude CLG20, +3.63% both up more than 3%.
Need to Know: Why oil could hit $80 even without a ‘full-blown’ U.S.-Iran war
Haven-related buying was credited with pushing gold GCG20, +1.38% up by 1.3%. The yield on the 10-year U.S. Treasury note TMUBMUSD10Y, -2.56% dropped 6.4 basis points to 1.82%.
What’s on the economic calendar?
The reaction to the Iran news threatened to overshadow economic data, including the release later Friday of the Institute for Supply Management’s closely watched December U.S. manufacturing purchasing managers index. Economists surveyed by MarketWatch, on average, expect the index, due for release at 10 a.m. Eastern, to rise to 48.8% from a reading of 48.1% in November, which would still leave the gauge in contraction territory.
Separately, government data on U.S. November construction activity is also due at 10 a.m. Eastern, while minutes of the Federal Reserve’s December meeting are set for release at 2 p.m. Eastern.
Investors are also due to hear from a number of Federal Reserve officials, including Fed Gov. Lael Brainard, San Francisco Fed President Mary Daly, Chicago Fed President Charles Evans and Dallas Fed President Robert Kaplan, who are attending an economic conference in San Diego.
