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US futures rise as nerves settle over Iran attack

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US futures rise as nerves settle over Iran attack

U.S. stock futures rose on Monday as concerns about the fallout from Iran’s attack on Israel eased, allowing the focus to return to earnings season and inflation risks fueling hopes for a rate cut.

S&P 500 (^GSPC) futures added 0.4%, while the Dow Jones Industrial Average (^DJI) rose about 0.3% after ending the week with sharp losses. The tech-heavy Nasdaq 100 (^NDX) led gains, with futures up 0.5%.

Calm is returning as investors shake off initial concerns about a full-blown war in the Middle East following Iran’s direct missile and drone attack on Israel on Saturday. U.S. efforts to encourage Israel not to retaliate have calmed nerves, in part because the well-telegraphed attack kept damage limited.

Stock prices have come under pressure as earnings season got off to a lackluster start and concerns remain that inflation has stalled toward the Federal Reserve’s 2% target. Traders have scaled back their bets on the depth of Fed rate cuts this year in light of disappointing economic data.

Eyes now turn to results from Wall Street heavyweights Goldman Sachs (GS) and Charles Schwab (SCHW) later on Monday, as many investors look to corporate results to revive the early 2024 stock rally.

In commodities, oil prices fell about 1% on Monday, after rising ahead of the Iranian airstrike. West Texas Intermediate crude futures (CL=F) traded at just under $85 per barrel and Brent futures (BZ=F) above $89.

Meanwhile, the 10-year Treasury yield (^TNX) added four basis points to trading near 4.57%, following a sharp decline on Friday and a return to a five-month high last week. Peer safe haven gold (GC=F) was 0.3% lower, after rising as much as 1.2% last week as tensions escalated in the Middle East.

Live3 updates

  • Salesforce could start looking for deals

    Several reports have surfaced that Salesforce (CRM) is nearing a deal to buy data management company Informatica (INFA) for approximately $11 billion – which is why both tickers are at the top of Yahoo Finance’s ‘Trending Ticker’ page this morning.

    Shares of Salesforce have fallen on the news, as the vibe on the street is that it’s unclear whether the company would be a good fit (for example, it has lower margins than Salesforce).

    The Street also welcomed a Salesforce over the past year that was more focused on increasing profit margins, after facing a surprise onslaught from activist investors (partly due to a series of dilutive acquisitions). This would be Salesforce’s first major deal since acquiring Slack in 2021 for $28 billion.

    Informatica’s stock is lower as Salesforce may not offer a premium for the company, according to reports.

    Knowing Marc Benioff, co-founder and CEO of Salesforce, I’m a little surprised by the potential return to dealmaking. He’s told me several times in recent months that Salesforce remains focused on increasing profit margins. Last year, the company even disbanded its M&A team!

    Nevertheless, Benioff likes to make big deals and the company has the money to do them. So why not.

  • Eyes on Nvidia and Intel

    Citigroup opens “upside catalyst watches” on Nvidia (NVDA) and Intel (INTC) shares after the chipmakers’ shares fell over the past month.

    On Nvidia:

    “Recent supply chain discussions indicate that demand visibility has extended into the first half of 2025 with calendar year 2024/2025 GPU [chip] unit outlook well in line with our base model of 4.3m/5.2m. We expect supply chain commentary from key foundry/memory suppliers during earnings calls and Computex Taiwan on June 2, where Nvidia CEO Jensen Huang will deliver a keynote that could be a positive catalyst for the stock.”

    About Intel:

    “Intel shares are down ~29% year to date and we think the stock is experiencing negative sentiment due to the foundry companies’ losses. Given March’s positive notebook data of a 44% month-over-month increase, “We believe there are upsides to the consensus estimates and expect the shares to trade higher as Intel generates roughly 31% of its revenue from notebook CPUs.”

    Further Analysis: In the Sunday Morning Brief newsletter, I had a somewhat contrarian view on Nvidia’s stock price action. More about this here.

  • Continue to connect the dots of the Iran-Israel conflict

    As markets leisurely digest the weekend news of Iran’s attack on Israel, it is important to continue connecting the dots on these geopolitical risks.

    Especially when it comes to oil, which Citi believes could now reach $100 per barrel.

    I liked the dot connection that the Deutsche Bank team made on the oil front this morning:

    “The effects of higher oil prices will be felt most immediately globally, and this comes at a time when there are already concerns about persistent inflation in several countries. That is something that could create a dilemma for central banks, as we also discovered after Russia’s invasion of Ukraine in 2022. On the one hand, there is a risk that a geopolitical shock will harm growth, bringing forward the timing of interest rate cuts. Markets had clearly priced in that risk on Friday, with the probability of a Fed rate cut in June rising from 24% to 30%, although that has since fallen back to 24% this morning. But if higher oil prices lead to more inflation and there are second-round effects on other prices, then that could mean monetary policy must remain in restrictive territory for longer. So the potential effects can work both ways.”