Stock Market Update

Equity futures point to a sharply lower opening this morning as an escalation in hostilities between the U.S. and Iran sends oil prices surging and puts broad pressure on stocks.

Oil-driven volatility played a role in yesterday's lower finish for the major averages, with President Trump revoking the waiver that allowed Iran to sell oil after Iran struck several commercial ships in the Strait of Hormuz. Tensions escalated further overnight, with President Trump declaring the ceasefire over and Axios reporting that fresh U.S. strikes on Iran were four or five times bigger in scope than previous strikes. WTI crude oil is currently up $3.60 (+5.1%) to $74.04 per barrel.

Elsewhere, semiconductor stocks are on track for another lower opening, with concentrated pressure across the group weighing on the major averages yesterday. Memory names are among the worst performers in the premarket.

Today will be lighter on the data side, though the market will receive the minutes for the June FOMC meeting at 2:00 p.m. ET, the first with new Fed Chair Kevin Warsh at the helm. The MBA Mortgage Applications Index for the week ended July 4 decreased 2.2%, from a previously unchanged level.

In corporate news:

• The White House is pressuring grocers to lower beef prices, according to The Wall Street Journal.
• Affordable Care Act premiums will likely rise by double digits next year, according to NBC News.
• Apple (AAPL 309.84, -0.82, -0.2%) expanded its Broadcom (AVGO 369.22, -1.56, -0.4%) agreement with a new $30 billion U.S. chip commitment.
• SK Hynix (SKHY) ADR offering is seeing strong demand, multiple times oversubscribed, according to Reuters.

Reviewing overnight developments:

Equity indices in the Asia-Pacific region ended the midweek session on a mostly lower note with South Korea's Kospi (-5.4%) falling to its lowest level since late May. Japan's Nikkei: -2.1%, Hong Kong's Hang Seng: +3.0%, China's Shanghai Composite: -0.5%, India's Sensex: -2.2%, South Korea's Kospi: -5.4%, Australia's ASX All Ordinaries: -0.3%.

In news:

• Hong Kong's Hang Seng (+3.0%) outperformed with chip and AI-related stocks contributing to the advance amid reports that Chinese officials could restrict foreign access to the country's top AI models.
• The yen is back near this year's low against the dollar even though Bank of Japan policymaker Asada dropped his opposition to rate hikes, strengthening the central bank's hawkish bias.
• The Reserve Bank of New Zealand raised its official cash rate by 25 basis points to 2.50%, as expected.

In economic data:

• Japan's May Current Account surplus JPY3.06 trln (expected surplus of JPY3.19 trln; last surplus of JPY4.21 trln). June Bank Lending 5.7% yr/yr (expected 5.8%; last 5.7%). June Economy Watchers Current Index 44.0 (expected 44.3; last 43.6)
• South Korea's May Current Account surplus $38.61 bln (last surplus of $28.29 bln)
• Australia's May Building Approvals -1.1% m/m, as expected (last -0.2%); 5.3% yr/yr, as expected (last 10.9%)

Major European indices trade on a sharply lower note with some renewed pressure on sentiment from higher oil prices after Iran's continued attacks on cargo ships in the Strait of Hormuz, which prompted the U.S. Treasury to revoke Iran's permission to sell oil on the global market. STOXX Europe 600: -1.5%, Germany's DAX: -2.1%, U.K.'s FTSE 100: -1.2%, France's CAC 40: -1.9%, Italy's FTSE MIB: -1.1%, Spain's IBEX 35: -2.3%.

In news:

• President Trump called for ending all trade with Spain, calling the nation a "terrible partner in NATO."
• Marine Le Pen confirmed that she will run in next year's presidential election in France after an appeals court ruled that her 15-month office ban has been served.

In economic data:

• France's May Current Account deficit EUR100 mln (last deficit of EUR600 mln)