After mounting tensions following the US drone strike that killed top Iranian commander Qassem Soleimani, Iran launched a ballistic missile offensive against two US military bases in Iraq on Wednesday in a show of retaliation. The bases- Ain al-Asad and Erbil- thankfully suffered only material damage, as no casualties were reported, and only buildings housing equipment appeared to be targeted. Shortly after the missile attack, there were reports of a Ukrainian passenger plane crash near the Tehran International Airport. It was unclear what caused the crash, and after initial denials, Iranian senior leadership ultimately admitted their military forces accidentally shot down the plane, mistaking it for an American cruise missile. Now Iran’s focus is on handling dissent and protesters at home as they demand accountability and resignations from all persons involved, which means that for the time being, any fears these two nations would go into war have all but subsided.
As far as the markets as concerned, stock market futures fell precipitously as the above events unfolded but by market open on Thursday, all major indices were poised to continue on their way toward all-time highs. The Dow Jones Industrial Average closed at 28,823.77, near its 52-week high of 29,009.07, while the S&P 500 closed at 3,265.35, also near its 52-week high of 3,282.99, both signs of investor confidence following the Middle East uncertainty going into the week.
Brent crude closed at $64.98 after reaching $68.91 earlier in the week while West Texas Intermediate (WTI) closed at $59.04 after reaching $63.27, both indicating supply disruption fears have lessened.
Gold is hovering around $1,550/oz, while US government bond prices rose after data showed the economy added fewer jobs than expected in December. Although the unemployment rate is at historic lows, wage gains have not been as strong as in past economic recoveries, making inflation a distant concern.
Trade talks between the US and China are starting to look more promising. Positive news on this front may bode well for stocks and help further their march towards all-time highs. Other economic news to watch out for in the week ahead- US retail sales, Consumer Price Index data and the Federal Budget.
-OG