Stock index futures fell on Friday, and yields were lower, as geopolitical tensions in the Middle East rose after reports of Israel launching a retaliatory strike against Iran.
Nasdaq 100 futures (NDX:IND) -0.6%, S&P 500 futures (SPX) -0.4%, and Dow futures (INDU) -0.3%.
Reports of Israel’s attack come a week after Iran launched drones and missiles at Israel in retaliation to a suspected Israeli attack on Iran’s consulate in Syria on April 1.
“Markets are reacting to new developments in the Middle East overnight, as U.S. officials have said that Israel had launched a missile strike against Iran,” said Deutsche Bank’s Henry Allen, adding that the news raised fears that the conflict will escalate further.
“Financial markets are having to assess political risks – something markets are ill-equipped to do. U.S. officials confirmed Israel had attacked Iran, with reports of an explosion in Isfahan,” said UBS’ Paul Donovan.
“U.S. markets will not have the opportunity to react directly to the developments until later, but the escalation will put pressure on the main indices, which were already lining up for a weekly drop,” said Richard Hunter, Interactive Investor.
Wall Street on Thursday had ended mixed, amid a resumption in the bond selloff and continued uncertainty over the future of rate cuts.
“The selloff wasn’t confined to equities, and before the geopolitical developments overnight, sovereign bonds also fell thanks to strong U.S. data, which led investors to become increasingly skeptical the Fed would cut rates this year,” Allen said.
Rates also ticked lower after reports of Israel’s strike. The 10-year Treasury yield (US10Y) fell basis 5 points to 4.59%. The 2-year yield (US2Y) fell 3 basis points to 4.96%.
On the earnings front, Netflix (NFLX) was down ~6% in pre-market trade, despite the streaming giant beating expectations on Q1 earnings and subscriber growth, as it said it would stop reporting subscriber numbers in time.
Procter & Gamble (PG) and American Express (AXP) are expected to report their financial numbers before the bell on Friday.
