Rising bond yields and oil prices weigh on markets as Samsung gains on government intervention: Dow Jones, S&P, Nasdaq, Wall Street Futures
U.S. stock futures moved lower on Monday as investors remained cautious amid elevated global bond yields and ongoing geopolitical tensions surrounding Iran. Oil prices stayed above the $100-per-barrel threshold, keeping inflation fears alive, while shares in Samsung Electronics advanced after South Korea’s government intervened in labor negotiations aimed at preventing a strike at the company’s memory chip operations.
Futures retreat
U.S. equity futures traded in negative territory on Monday, pressured by higher sovereign bond yields and renewed strength in oil prices.
At 03:28 ET, Dow Jones futures were down 321 points, or 0.7%, while S&P 500 futures slipped 32 points, or 0.4%. Nasdaq 100 futures fell 96 points, or 0.3%.
The three main Wall Street indices all finished Friday’s session down more than 1%, as investors grew increasingly concerned that the conflict involving Iran could trigger an energy-driven inflation shock.
Despite the recent weakness, optimism surrounding artificial intelligence spending has continued to provide support to global equities. The S&P 500 remains well above levels seen before the joint U.S.-Israeli military action against Iran that began in late February.
Attention later this week will focus on results from semiconductor giant NVIDIA (NASDAQ:NVDA), whose role in the AI sector has helped propel the company into the ranks of the world’s most valuable businesses.
Bond market remains central focus
Analysts at ING described the ongoing selloff in global bond markets as the “dominant story” currently shaping financial markets.
Higher bond yields not only increase borrowing costs for governments and consumers, but also reduce the present value of future corporate earnings, potentially weighing on stock valuations.
The yield on the U.S. 10-year Treasury note climbed to its highest level in 15 months, while the 30-year yield also moved higher. Government bond yields across Europe and Asia have followed a similar upward trend.
The rise in yields has largely been driven by a sustained increase in oil prices linked to the effective closure of the Strait of Hormuz, a critical shipping route off Iran’s southern coastline through which approximately 20% of global oil supply passes.
Markets have become increasingly concerned that rising energy costs could fuel inflation and force central banks to maintain tighter monetary policy or even raise interest rates further.
Expectations for an additional Federal Reserve rate increase this year are now viewed as roughly evenly balanced.
“High oil prices and higher bond yields are a big headwind to risk assets and stand to keep the dollar supported in the near term,” ING analysts said.
Oil prices continue rising as ceasefire remains fragile
Crude oil prices extended gains as the conflict involving Iran entered its 80th day without clear indications of a resolution.
At 03:59 ET, Brent crude futures were up 1.0% at $110.32 per barrel.
Over the weekend, a drone attack caused a fire at a nuclear facility in the United Arab Emirates, while Saudi Arabia reported intercepting three drones.
The incidents added further uncertainty to the fragile ceasefire between Washington and Tehran. President Donald Trump wrote on social media that “the clock is ticking” for Iran to secure a peace agreement. Trump later added: “I can tell you one thing — they’re dying to sing [a deal].”
However, analysts at Deutsche Bank noted that the ceasefire has now lasted longer than the initial period of active fighting, which they said could suggest that “the U.S. would prefer to avoid” launching renewed military strikes because of the associated “political and economic consequences.”
The surge in oil prices has significantly increased gasoline prices in the United States, intensifying inflation pressures ahead of key mid-term elections scheduled for November.
Analysts have warned that any renewed military escalation with Iran could further push up fuel and broader consumer costs.
“As a result, the tense stalemate continues,” Deutsche Bank analysts wrote.
Samsung gains as Seoul steps into labor negotiations
Shares in Samsung Electronics (USOTC:SSNHZ) rose after South Korea’s government intervened in talks aimed at preventing a strike at the company’s memory chip division.
Samsung and its labor union resumed negotiations on Monday under government mediation. The discussions followed comments from South Korean President Lee Jae Myung, who said in a social media post that management rights should be respected alongside workers’ rights.
Prime Minister Kim Min-seok warned over the weekend that a strike at Samsung’s semiconductor operations could cause severe economic disruption and should be avoided.
A South Korean court also threatened to impose fines of around 100 million won ($66,500) per day on Samsung’s domestic union if it proceeds with strike action in violation of court instructions.
Workers at Samsung’s semiconductor unit had planned to strike from May 21 after compensation negotiations, particularly linked to Samsung’s gains from artificial intelligence demand, failed to produce an agreement.
Samsung remains South Korea’s largest employer and most valuable company.
Chinese economic data signals weaker demand
New data released Monday showed that China’s manufacturing activity weakened sharply in April, while retail spending remained subdued, highlighting persistent weakness in domestic demand and ongoing difficulties in the property sector.
Industrial production increased 4.1% year-on-year in April, missing expectations for 6.0% growth and slowing from the 5.7% pace recorded in March.
“Industrial activity has been supported by strong external demand, but the rest of China’s domestic demand indicators have been quite lacklustre,” ING analysts said in a recent note.
Retail sales rose just 0.2% from a year earlier, well below forecasts for a 2.0% increase and slower than the 1.7% growth recorded in March, pointing to continued caution among Chinese consumers.
Samsung stock price