Market Reactions to Ongoing Iran War
The impact of the Iran war is becoming increasingly evident. Last week, rising oil prices put pressure on stock values, causing the Dow and Nasdaq to drop over 10% from their peak levels, entering correction territory. On Friday alone, the Dow fell by approximately 1.7%, while the Nasdaq declined by 2.2%. For the week, those averages settled at around 1% and 3.2% down, respectively. Currently, the Dow Jones Industrial Average is down 10% from its recent closing high, with the Nasdaq trailing at roughly 13% lower. The S&P 500 also experienced a dip, down 1.7% on Friday and 2.1% for the week, marking an overall decline of 8.7% from its peak—just avoiding correction territory.
But it wasn’t just the war that impacted stock prices on Friday; it added to a fifth consecutive week of market struggles. The announcement that Anthropic is testing a powerful new AI model caused turbulence among enterprise software stocks, particularly in the cybersecurity sector. Those stocks really shouldn’t have been grouped with others. Meanwhile, social media companies faced setbacks after two court rulings in child safety lawsuits went against Meta’s platform.
Key Themes from Wall Street’s Troubles
One major theme has been the soaring oil prices. Attempts at resolving hostilities between Iran and the United States are ongoing, but enthusiasm seems to be lacking on both sides. President Trump has extended the deadline for Iran to secure the Strait of Hormuz oil route, threatening potential military action if they don’t comply by April 6th. Market analyst Jim Cramer noted that stocks are unlikely to recover while this key shipping lane remains closed and oil prices remain elevated due to supply issues. Last Friday, West Texas Intermediate crude surged 5.5% to $99.64 per barrel, hitting its highest price since July 2022. Similarly, Brent International Crude rose 4.2% to $112.57, signifying intense upward trends in oil prices. Over the past month, the average price for regular unleaded gasoline has spiked to just under $4 per gallon, reflecting a $1 increase.
Amid this turmoil, Costco found a silver lining as it launched a standalone gas station to boost pump utilization, which could also lure more customers to its stores. This strategy appears to be paying off, with Costco’s stock gaining 1.2% last week.
“Anthropic the Impaler”
At the March meeting of the Investment Club, Cramer humorously labeled Anthropic as “Anthropic the Impaler,” suggesting that developments in AI startups tend to harm stocks in the software sector. Following the news about Anthropic, stocks like CrowdStrike and Palo Alto Networks saw reductions—CrowdStrike fell about 6%, while both companies lost over 9% throughout the week. The worry among investors is that innovations from AI might supplant traditional enterprise software firms, yet Cramer argues that AI cannot fulfill the stringent cybersecurity standards necessary for proper protection.
CrowdStrike’s CEO, George Kurtz, emphasized on “Mad Money” that all businesses harnessing AI must establish independent safeguards for compliance and enforcement. Cramer likened the situation to a dentist trying to conduct brain surgery—essentially, there’s a clear gap in expertise. Amid pressures from Databricks’ move into security, Cramer seized the opportunity to buy into CrowdStrike’s weaknesses. While he is still favorable toward Palo Alto, he has decided not to hold both stocks in his portfolio and prefers CrowdStrike at this moment.
Last week, Meta Platforms also faced significant challenges, experiencing a nearly 11.5% decline following adverse rulings in addiction lawsuits in California and New Mexico. Cramer expressed his desire to uplift sentiments about the company, acknowledging the lawsuits but asserting that Meta has valid defenses. He dismissed the comparisons of Meta to harmful products like cigarettes or asbestos, although he saw parallels to the talc lawsuit involving Johnson & Johnson.
Cramer criticized Zuckerberg for major spending on AI, but ultimately conceded, “Whenever I doubted him, I was wrong.”
As part of Jim Cramer’s CNBC Investment Club, members receive pre-trade alerts before he makes moves with his charitable trust’s portfolio. After issuing a trade alert, there’s a wait time of 45 minutes before any stocks are bought or sold, and if mentioned on CNBC, there’s a 72-hour pause before execution.
