After last night’s Iranian attack on the U.S. troops stationed at two Iraqi airbases and a relatively restrained morning message from U.S. President Donald Trump, financial markets have decided to take profits in oil and cybersecurity stocks today. And wait for the next stage in this confrontation?
Oil prices, which had climbed on fears that the U.S.-Iran conflict would reduce the flow of oil from the Middle East, retreated strongly today with U.S. benchmark West Texas Intermediate falling 4.42% to close below $60 a barrel at $59.94. International benchmark Brent dropped 3.62% to $65.80 a barrel.
Cybersecurity stocks, which had chugged past oil during these first days of the crisis, dropped as well with Palo Alto Networks (PANW), where gains had been relatively modest, falling 1.27% at the close, and FireEye (FEYE), which had moved ahead much more strongly, dropping 5.01%. (If you’re a trader trying to play this crisis in the short term, FireEye, a more speculative stock at the moment than Palo Alto, provides more trading leverage and is thus likely to move more rapidly in response to day to day news. The difference in the five-year Beta between the two stocks, with FireEye at 1.01 and Palo Alto at .94, one just slightly above the 1 Beta for the Standard & Poor’s 500 and on just below, understates, in my opinion, the recent difference in volatility between the stocks.) The ETFMG Cyber Security ETF (HACK) closed up 0.58%. (I think that’s a reflection of the composition of the ETF’s portfolio, which is less concentrated in pure cybersecurity plays. For example, Cisco Systems (CSCO), which makes up one of the ETFs top five holdings, was up 0.06%. Splunk (SPLK) another top five holding, closed ahead 1.53%.)
The Standard & Poor’s 500 closed with a 0.49% gain today. The Dow Jones Industrial Average was up 0.56%. The NADAQ Composite climbed 0.67% and the Russell 2000 small cap index moved higher by 0.32%.
In some ways the market looked much like it looked before the U.S. drone strike threw the region into chaos. Chip stocks were once again strong performers with Cirrus Logic (CRUS) up 0.91%, Skyworks Systems (SWKS) advancing 1.59%, and Taiwan Semiconductor Manufacturing gaining 0.74%.
