After the U.S. and Israel conflict over the weekend, markets brushed off uncertainties to start the week. On Tuesday, fears in Asia led to a sell-off in South Korean stocks. Samsung (SSNLF) fell by around 10%.
Markets acted on the fear of escalating war by selling semiconductor stocks. Nasdaq (QQQ) fell as much as around 2% before climbing back. Micron Technology (MU), AMD (AMD), and Intel (INTC) led the decline. Broadcom (AVGO) and Nvidia (NVDA) faced modest drops, since they are the strongest firms benefiting from the AI chip boom.
Rising oil prices risk hurting the broader market. Exxon Mobil (XOM) spiked as high as $159.60 before closing below $152. The trading action suggests that markets are not convinced that the Middle East conflict would disrupt oil supplies in the medium term.
Investors need to watch WTI crude prices closely. Firm prices would signal expectations of higher energy prices for longer. That would increase inflation, which hurts consumer demand. It would effectively slow the global economy.
Safe-haven technology stocks are not likely to bounce back from their yearly lows. Microsoft (MSFT) and Meta (META) are not as attractive as consumer defensive firms like Procter & Gamble (PG) or J&J (JNJ). Investors prefer household product conglomerates. They would likely perform the same in good times and in bad.
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