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New York stock markets experienced a dramatic day on April 2nd (local time). While they plummeted early in the session due to President Trump's hawkish remarks, news of negotiations between Iran and Oman regarding the Strait of Hormuz emerged, leading to a full recovery of losses and a successful rebound for the Nasdaq. It was a day marked by market volatility as fears of prolonged war clashed with hopes for an alternative route through the strait.
New York stock markets had a dramatic day on April 2nd. After US President Donald Trump's public address regarding Iran, expectations for an end to the war collapsed, causing major indices to plunge early in the session. Just the day before, the market, buoyed by hopes of de-escalation, saw the S&P500 surge by 2.91%, marking one of its strongest rallies of the year. However, in his speech, President Trump made no mention of negotiations or the possibility of ending the war; instead, he reiterated military action, stating, "We will strike Iran extremely hard over the next two to three weeks." The market's disappointment was compounded by Trump's failure to even mention April 6th, the final deadline for the reopening of the Strait of Hormuz.
Consequently, international oil prices surged in the short term. WTI crude briefly soared over 13% during intraday trading, reaching $111.71 per barrel. The average US gasoline price surpassed $4 per gallon for the first time since 2022, rising to $4.1. However, this figure is from the previous day's data provided; on April 2nd, oil prices had surged intraday but then partially retreated.
What turned the market sentiment around was the news of negotiations between Iran and Oman that broke during the trading day. Iran's state news agency (IRNA) reported that Iran and Oman were drafting an agreement to jointly monitor and coordinate ship traffic in the Strait of Hormuz. Iranian Deputy Foreign Minister Kazem Gharibabadi explained, "This measure is not about restricting passage but about ensuring navigation safety and improving services." The market interpreted this statement as a signal that the possibility of a strait blockade might ease, and the surge in WTI crude narrowed from 13% to around 7%.
Following this news, the three major New York stock indices collectively recovered their losses and successfully turned upward. Ultimately, the Dow Jones closed down slightly by -0.13%, but the Nasdaq finished up +0.18% and the S&P500 up +0.11%. The Philadelphia Semiconductor Index rose by 0.40%, and the Russell 2000 small-cap index showed a relatively strong performance, gaining 0.70%.
However, the market's turnaround does not mean that all uncertainties have been resolved. First, the US continues to show a passive stance on the Strait of Hormuz issue, and the possibility of Iranian attacks on energy facilities remains a valid variable. Furthermore, the Iranian parliament recently passed a bill to impose transit fees on the Strait of Hormuz, expecting annual revenue of $100 billion (approximately 150 trillion won) from these fees.
Warning signs have also appeared in the private credit market. Blue Owl Capital announced on April 2nd that it would limit redemptions to 5% for two of its private credit funds, facing large redemption requests. One fund received redemption requests amounting to 40.7% of its holdings. Following this news, shares of major asset managers like Blackstone, Apollo, and KKR all plummeted by over 4%. This is a signal that could escalate into broader concerns for the entire $1.8 trillion private credit market, increasing potential uncertainties within the market.
Even with war risks being sufficiently burdensome, economic indicators added another layer of concern. The March ISM Manufacturing PMI, released on April 2nd, came in at 49.0, falling below both the estimated 49.5 and the previous month's 50.3, thus dropping below the 50-point threshold (the benchmark for economic expansion and contraction). Notably, while new orders, production, and employment indices all deteriorated, the price index surged, suggesting that stagflation concerns triggered by tariffs and war are materializing.
The Atlanta Fed's GDPNow model's forecast for Q1 US growth further worsened from -2.8% to -3.7%. The surge in Google Trends searches related to 'recession' and 'stagflation' is along the same lines. While the Dow Jones closed slightly down, the Nasdaq's resilience is attributed to the market reacting to the expectation that 'the Hormuz risk would not worsen' rather than 'prolonged war risk,' as well as the re-entry of selective bargain-hunting funds into big tech and semiconductor AI-related stocks amidst concerns of an economic slowdown.
Major volatility events are anticipated next week. The US Department of Labor will release the March non-farm payrolls report on April 3rd (Good Friday, local time), but due to the Good Friday market closure, the stock market will reflect this two days later, on April 6th (Monday). This means there's a high possibility of a 'jump' market where all variables are reflected at once in a single day, as key employment figures are released during a period when markets are not trading. The market expects March non-farm new employment to be around 50,000 to 60,000; if it falls below expectations, it could act as a downside risk.
Market attention is now focused on the April 6th deadline for the Strait of Hormuz and the reciprocal tariff announcements scheduled for next week. Warning signs from the private credit market and signals of an economic slowdown indicate that the volatile market phase will not end easily.
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