Investors, traders and speculators faced fresh headwinds from Asia on Wednesday. President Donald Trump said the U.S. is “probably” going to launch additional attacks on Iran to retaliate for Islamic Revolutionary Guard strikes on three commercial tankers as they transited the Strait of Hormuz on Tuesday.
“I’ll give them a little warning,” Trump said from the sidelines of the NATO summit in Ankara, Turkey. “We’re going to hit them hard tonight, but we’ll see how it all works out.”
The front-month West Texas Intermediate crude oil futures contract was up 5.2% to $74.09 per barrel after the president also threatened to reimpose a naval blockade at the key chokepoint for the global hydrocarbon market, but only for Iran.
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“Look for cooler heads to prevail in coming days, with traffic returning to the Strait of Hormuz and Iran and the U.S. returning to the negotiating table,” Mizuho Securities Director of Energy Futures Bob Yawger forecast.
Yawger expects negotiations to “drag on” over the next two months, “with both sides eventually agreeing on a weak deal that does not remove Iran’s enriched uranium and possibly allows the Iranians to ‘manage’ the Strait of Hormuz.”
Nvidia (NVDA, +3.7%), the leader of the AI revolution and the biggest company in the world based on market cap, trended higher through the day after gapping down at the opening bell.
The Nasdaq Composite rallied off its intraday low, and by the closing bell the tech-heavy index was up 0.2% at 25,870. But the broader S&P 500 declined 0.3% to 7,482, and the blue-chip Dow Jones Industrial Average fell 1.1% to 52,348.
Buffett’s Berkshire portfolio gets an energy boost
Integrated oil and gas supermajor Chevron (CVX, +1.1%), which offers all of upstream (exploration and production), midstream (storage and transportation) and downstream (refining and retail) energy exposure, led the 30 Dow Jones stocks for much of Wednesday’s trading session.
But Occidental Petroleum (OXY, +3.7%), one of the biggest North American E&P outfits, enjoyed a bigger bounce from renewed tension in the Middle East.
New Berkshire Hathaway (BRK.B, -1.8%) CEO Greg Abel sold CVX during the first quarter. But he held OXY in what is still basically Warren Buffett’s stock portfolio.
Abel also engineered Berkshire’s $9.7 billion acquisition of Occidental’s chemical business that closed in January, and Berkshire remains the largest holder of the energy stock, with more than a quarter of OXY’s outstanding shares.
Chipmakers Samsung Electronics and SK Hynix led the Korea Composite Stock Price Index into “bear market” territory, broadly defined as a 20% decline from a recent all-time high.
The KOSPI reached its record closing high of 9,114 on June 22, but a 5.4% slide on Wednesday following Tuesday’s 4.9% sell-off left it 20.5% below that peak at 7,246. Samsung was down 6.3%, SK Hynix 5.7%. The latter will start trading in the U.S. on Friday under the symbol SKHY.
Selling pressure on tech stocks generally eased with confirmation from Apple (AAPL, +0.9%) of a new silicon deal with Broadcom (AVGO, +4.8%) that extends their longstanding relationship into 2031.
The iPhone maker added meat to the bone by confirming a commitment of at least $30 billion “to design and produce custom silicon components and cutting-edge wireless connectivity technologies for a wide range of Apple products.”
Take a few seconds to read the FOMC minutes
Like the policy statement summarizing the FOMC’s most recent decision to hold the target range for the federal funds rate at 3.50% to 3.75%, the minutes from the June Fed meeting were a lot shorter than they used to be, by about 22% based on a crude word-count comparison.
This “communication breakdown” is actually a big part of the “regime change” promised by new Fed Chair Kevin Warsh.
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Warsh described a “family fight” about interest rates and the trajectory of inflation during his post-meeting press conference, and the minutes reveal a central bank still making decisions based on incoming data.
Brevity is catching on, though: “A number of participants noted that it was an opportune time to consider significant changes to the FOMC’s postmeeting statement,” the June FOMC minutes reveal. “A majority of participants remarked that they saw advantages in shortening the statement.”