Despite staging a major reversal to the upside in Nasdaq (QQQ), stock markets are showing hesitation to rise further. The U.S. Iran war started in February. Six months later, the Strait of Hormuz is still not fully open. The waterway is a choke point that may not likely return to pre-war shipping traffic levels.
WTI crude and Brent oil prices are on the rise. This time, their price levels might stay elevated. The U.S. is drawing down its oil reserve, which strengthens Iran’s negotiating position.
Investors sold Amazon (AMZN), Alphabet (GOOG), and SpaceX (SPCX) shares. That hurt the S&P 500 (SPY) and Nasdaq. Investors increased their position in energy stocks like Exxon (XOM) and ConocoPhillips (COP). The sector offers them a hedge against the risk of oil prices rising higher for longer.
SpaceX’s decline below its $135 IPO price on Tuesday is a good barometer for stock market sentiment. If the stock trades at or below break-even prices for longer, investors might grow impatient. They might want to sell SPCX stock, preferring to hold income-generating stocks instead.
Tobacco stocks like Altria (MO) pulled back, while REITs like W.P. Carey (WPC) and Realty Income (O) also dropped. As volatility continues, investors might choose to hold those stocks for their strong dividend yield.
