Stocks trade lower on geopolitical tensions: Top Takeaways

US equities (^GSPC, ^DJI, ^IXIC) closed Thursday's trading session lower ahead of March's jobs data to be released Friday morning. In addition, President Biden warned Israeli Prime Minister Benjamin Netanyahu over the humanitarian crisis developing in Gaza, suggesting military aid from the US could become conditional.

Yahoo Finance Head of News Myles Udland joins Market Domination Overtime to break down the top takeaways from April 4's trading day.

For more expert insight and the latest market action, click here to watch this full episode of Market Domination Overtime.

Editor's note: This article was written by Nicholas Jacobino

Video transcript

JULIE HYMAN: Yahoo Finance's head of news Myles Udland here with his takeaways on the day. I mean, you know, I always jinx it, Myles. Because I wrote earlier in this week in the "Morning Brief" about how the fundamentals hadn't really changed even though we were seeing some spiking bond yields, but I don't know. There's a lot of questions it feels like this week.

MYLES UDLAND: Well, I feel like today's action shows the market in, kind of, a fragile state. Because you have-- I mean to me, going back over my history covering financial markets, it feels like Middle East tensions, geopolitical tensions of all variety are cited when there's these days that things move a little bit more than you thought they would. And I mean, there is material news, obviously, out of the Middle East today with expected attacks from Iran. You have the president coming out offering his view on whether there should be a ceasefire in Israel-- or in Gaza rather. So there's all these different components to that.

It's not like it's a total nothing trade. But to see the market act the way it did overall feels to me that the market is in just a little bit of a heightened state. Because the other side of this is have Austan Goolsbee and Neel Kashkari, two Fed presidents-- regional Fed presidents coming out and offering their views on inflation, and rates, and all this, where they think things are going. And with respect to both of those men, normally wouldn't be huge market movers. But both of them together today saying things that markets really seemed to listen to and it just added into a pretty jumpy picture, especially if you look at the intraday chart.

Bad markets act bad after 2:00 PM. We saw that in all fragile states of the market, 2022, it's like, that's the way that it goes. You see this cascade of selling into the close. And so for that pattern to hold today, I think, shows, again, a lot of unease out there on the Street.

JOSH LIPTON: Yeah, geopolitics, you just reminded me though, Myles, that Ed Yardeni this week and he remains bullish. But I thought it was interesting he told his clients the one big risk, if he had to put one bull's eye on it, is geopolitics. And he said this earlier in the week to his clients that he does look at Israel and Iran and he thinks there's greater risk of tensions ramping there and disruptions to the oil markets. So it was interesting on how strategists trying to game that.

MYLES UDLAND: Yeah, I think for investors too, there's a huge lack of control when it comes to that stuff relative to how Fed speakers are behaving or what Fed speakers are reacting to. I mean, I think there's a lot of market participants who believe that-- you saw it in the beginning of the year, the way the market priced in interest rate cuts very aggressively. And the Fed, kind of, held steady. And they, kind of, agreed, let's say, ahead of the March Fed meeting, OK, we can hold on three for right now.

There's an interplay between Fed speak and markets and I'm not really sure that that holds when it comes to secretary of state, or heads of state meeting, or various militaries making strategic decisions. It doesn't work quite the same way. And so that's why I think it's always that perpetual risk. We all know from all these different folks that geopolitics is that unknown because markets really don't feel like they could exert any pressure on any entity though they might try.

JULIE HYMAN: And yet markets largely shrug off geopolitical tensions aside from, sort of, blips--

MYLES UDLAND: Yeah.

JULIE HYMAN: --like this, right? Usually, it doesn't have a lasting effect unless--

MYLES UDLAND: Until it does.

JULIE HYMAN: --and until it has an economic effect, right? And so to your point though, geopol wouldn't be an issue, Kashkari and Goolsbee wouldn't be an issue if there wasn't some underlying fragility in the market. And it's not a coincidence that tomorrow morning is the jobs report, right, and we're going to get another piece of data.

MYLES UDLAND: Yeah, I actually though-- as you're talking though, I think it's what you wrote earlier this week, that is the underlying tension. I think the jobs report is like, take it or leave it to be honest. But the move in yields is the underlying tension.

I mean it all comes back to, what is your cost of capital? For a company, for an investor, what's your hurdle rate? And as Treasury yields go higher, it challenges all of those assumptions.

I mean, we were sitting here two weeks ago talking about how great the debut was for Reddit. IPO window is open, let's go. Get it going.

Every investment banker is fired up. And now your cost of capital is way higher. And that is a challenge on all kinds of assumptions, which create the conditions in which geopolitics is now a problem, Austan Goolsbee is now a problem, et cetera.

JULIE HYMAN: And one more thing I want to point out that Jared put in our breaking news channel a little while ago, Investment Company Institute saying money market assets hit a record in the week ending April 3, $6.1 trillion. So it's also the competition for assets, right? If I'm worried about geopol and I'm going to put my money, more of my money in a money market because rates are also remaining high, maybe I'm not going to put as much in stocks or in risk assets.

MYLES UDLAND: Yeah, and I think there is also plenty to be said. I mean, it is a cliche, but cliches exist because they are true. That after a quarter in which the S&P is up 10% and everyone's all happy, where's the marginal bid in the first week of April as companies enter earnings season?

I mean markets are made on the margins. Is there a huge bid for corporate buybacks this week as you're sitting with your IR team prepping earnings? Probably not in the same way there was two weeks ago. And that's the stuff that can move the modern market, which is mostly passively driven. You can see a 3% fall on what feels like nothing, but there's a little something there.