Geopolitical strife is roiling Wall Street. Here’s what investors are watching

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Worries about an escalation of tensions in the Middle East rattled investors on Monday, with the Dow swinging 600 points over the course of the day to close about 250 points lower. That’s after the blue chip index dropped nearly 500 points on Friday.

Israel’s possible response to Iran’s weekend attack, war between Russia and Ukraine and ongoing trade battles between China and the United States have investors on edge as they worry about what could come next at a time when markets are already very jittery about persistent inflation.

JPMorgan Chase CEO Jamie Dimon said on Friday that geopolitics were the biggest threat to the “future of the free world.”

“It could be determinative on what happens to the global economy if oil and gas prices go too high,” Dimon said during the bank’s earnings call.

Here’s what investors will be watching closely this week.

Fed speak and the International Monetary Fund meeting: Policymakers and economists will share their economic outlooks as they gather in Washington, DC for the IMF-World Bank spring meetings.

On Tuesday, the IMF will release its latest World Economic Outlook, including forecasts for the global economy. US Federal Reserve Chair Jerome Powell will also make a rare speaking appearance when he joins Bank of Canada Governor Tiff Macklem in a fireside chat.

Seven Fed officials are slated to speak before Saturday, when the blackout period ahead of their next policy meeting begins. We’ll also hear from European Central Bank President Christine Lagarde and Bank of England Governor Andrew Bailey.

Oil and gold: Investors fear uncertainty over almost anything else, and that’s what they’re feeling right now, said Dave Sekera, chief US market strategist at Morningstar, in a note on Monday.

Those what-ifs could further roil gas and oil prices.

“In my view, if Iran is finished with this retaliatory strike, and assuming Israel doesn’t then try to attack Iran, the scope will be limited for the US markets,” he wrote.

But if there’s further conflict, he said, “you’d see a much higher premium for oil prices. And then gold would also see a safe-haven bid.”

Economists at Moody’s also see two possible scenarios for oil. If there’s a de-escalation of tensions between Israel and Iran, they said, oil prices should come down over the next few weeks. But if there’s an escalation in conflict, they expect that oil prices could jump to more than $100 per barrel, they wrote in a note Monday.

Spot gold, meanwhile, was up 0.3% at $2,349 per ounce on Monday. It hit an all-time high of $2,431 per ounce on Friday because of fears of rising geopolitical tensions. So far this year, bullion has surged nearly 14%.

US gold futures rose 0.4% on Monday and are up 15% this year.

Chips stocks and China: Stock prices of chipmakers like Nvidia and AMD have soared over the past 16 months as artificial intelligence became the story of the moment. But in the past month, there’s been a notable drop in those shares as growing tensions between the US and China cloud their outlook.

Shares of Nvidia fell by nearly 2.5% on Monday after the Wall Street Journal reported that government officials in China told major telecom carriers to phase out some key foreign chips.

Shares of AMD dropped 1.8% on Monday. According to AMD’s 2023 annual report, China accounted for about 10% of the company’s revenue.

New research from economists at the Federal Reserve Bank of New York found that export controls that limit the shipment of chips and other technology to China have hurt US companies and suppliers.

The limits have cost US suppliers about $130 billion in market capitalization, they found, and have led to declines in revenue and profits.

Boeing defends its planes’ safety ahead of whistleblower hearing

Boeing on Monday scrambled to address safety and quality concerns about its planes ahead of a whistleblower hearing in the Senate on Wednesday, report my colleagues Chris Isidore and Pete Muntean.

A briefing for journalists came in the wake of reports last week that the Federal Aviation Administration is looking into allegations raised by Boeing engineer Sam Salehpour that Boeing took shortcuts when manufacturing its 777 and 787 Dreamliner jets and that risk of catastrophic failure will increase as the planes age.

Salehpour is set to be the key witness at a Wednesday hearing of the Senate permanent subcommittee on investigations. Boeing, which has seen its once pristine reputation for safety and engineering quality badly diminished recently, held the briefing Monday to try to pre-emptively answer Salehpour, although the executives said they wouldn’t comment directly on his allegations.

Boeing has faced more than five years of questions about the safety and quality of its commercial jets following two fatal crashes of a different model, the 737 Max, in 2018 and 2019. Those crashes killed 346 people and led to a 20-month grounding of that jet.

It came under renewed scrutiny earlier this year after a door plug blew out on an 737 Max flight by Alaska Airlines on January 5, leaving a gaping hole in the side of the jet. That has sparked investigations and allegations that some Boeing employees felt reluctant to raise questions about the safety of the planes they are building or inspecting for fear of retaliation.

Read more here.

US retail sales rose in March for the second-straight month

Spending at US retailers rose in March for the second consecutive month, underscoring the strength of the US consumer fueled by a robust job market, reports my colleague Bryan Mena.

Retail sales rose 0.7% in March from the prior month, a slower pace than February’s upwardly revised 0.9% gain, the Commerce Department reported Monday. That beat the 0.4% increase that economists projected, according to a FactSet poll. The figures are adjusted for seasonal swings but not inflation.

Retail spending has increased in seven of the past 10 months through March.

“Today’s retail sales figures show strong consumer spending wrapping up the first quarter of 2024,” said Claire Tassin, retail and e-commerce analyst at Morning Consult, in a note Monday. “In March, promotional activity from e-commerce brands like Amazon helped to drive up online sales.”