Thursday's decline on Wall Street once again demonstrates that any geopolitical disturbance can swiftly shatter the market's fragile confidence. The Dow, S&P, and Nasdaq quickly dropped after the opening, reflecting investors' anxiety over the mixed signals between the Trump administration and Iran. Although there are reports that Tehran has responded to the US's 15-point plan, the lack of official confirmation and the instability of the Strait of Hormuz keep the risk of global trade bottlenecks looming over investors.
Policy Background
The latest warning from the OECD reveals systemic threats facing the global economy. The Middle East conflict is not just a regional military issue but has become a core variable threatening global inflation stability. Recent intense speeches by Fed officials indicate that with the potential for energy prices to cause secondary inflation, rate cuts are not a short-term option. The pricing moves of the FedWatch tool reflect investors' collective fear that a shift in monetary policy could be delayed until 2027.
Industry Impact
At the stock level, the collective decline of tech giants reflects a trend of risk-averse funds moving towards defensive assets. The declines of Meta and Alphabet highlight the vulnerability of digital advertising and communication services in the face of macro fluctuations. Meanwhile, acquisition news may boost the stock prices of individual companies like Olaplex, but it cannot offset the structural losses to the entire semiconductor sector caused by supply chain disruptions.
Market Reaction
The breadth of the market's decline indicates that the sell-off is not concentrated in specific sectors but represents a comprehensive deleveraging. The Nasdaq Composite recorded 75 new lows, with only 14 new highs. This data comparison clearly shows that the market bottom has not yet been established. Investors are in a highly sensitive state, where any positive news regarding US-Iran negotiations could trigger short-covering, but conflicting information would quickly lead to larger-scale sell-offs.
