Global stocks tumbled before paring losses after Iran said it didn't want war

Highlights:

Market Summary: Stocks dropped yesterday as the S&P 500 retreated -0.28%. Bonds also dropped as the U.S. 10-year Treasury note yield was up 2 basis points. The U.S. dollar moved higher by 0.37%. Despite the dollar move, gold was also higher by 0.35%. Crude oil dropped -0.90%.

Economic Data: The big economic data point yesterday was the ISM Non-Manufacturing PMI. The report came in at 55, up from 53.9 previously and above consensus estimates of 54.5. Factory orders were also reported but were down -0.7% month-over-month.

Source: Trading Economics

Gold: Gold has broken above its 2019 high with the recent move. Gold remains in a positive trend. The price action, to us, is implying a growth slowing but rising inflation environment. What made today's move so special is that gold rallied in the face of a stronger dollar.

Gold Miners: Gold mining stocks are demonstrating recent positive relative strength compared to the S&P 500. The ratio of the GDX ETF to the SPY ETF is above its 200-day moving average suggesting a positive trend.

High Beta: The High Beta ETF (SPHB) is showing positive relative strength against the Low Volatility ETF (SPLV). This ratio is above its 200-day moving average and was up when the market was down yesterday. In other words, this intermarket relationship is indicating a risk-on environment. This ratio was in a negative trend (relative to the 200-day moving average) and in favor of low volatility equities from mid-2018 through late-2019. Is the economy about to make a major move higher?

Chart of the Day: Credit spreads (blue) versus ISM Manufacturing (red). The weakness in the ISM manufacturing index is not being fully discounted by credit spreads. Credit spreads are near the lows of this cycle while the ISM is the lowest level since the global financial crisis. Will the jaws eventually shut?

Futures Summary:

News from Bloomberg:

Iran fired 15 missiles at U.S.-Iraqi airbases, risking further action from President Trump. Ten hit the Ayn al-Asad base and another facility in Erbil, U.S. officials said. One struck an air base near Baghdad and four fell out of the sky. Iran "concluded proportionate measures," Foreign Minister Mohammad Javad Zarif tweeted. He said he had no details on casualties.

Trump tweeted: "All is well!" and "So far, so good!" while adding damage assessments continued. He said he'll make a statement this morning. A White House official said the early thinking was the strikes were a perfunctory move that would let Iran retaliate without incurring a U.S. counter-assault. Follow all the developments with our Iran Update.

A Boeing 737 crashed after take-off in Tehran, killing all 176 passengers and crew on the Ukraine-bound flight. Sixty-three Canadians and 82 Iranians were among the dead. Iran's transport ministry suggested an engine fire was to blame and dismissed speculation it was downed by a stray missile. The FAA barred civilian flights over the region after the earlier missile attack. A string of airlines changed routes and Lufthansa suspended flights.

The tragedy comes as Boeing reels from its 737 Max crisis. The grounded jet is a successor to the plane involved in the Tehran accident. Under international law, Iran will lead any investigation since the crash occurred on its soil. The rules also allow the country that manufactured the plane to participate, though the geopolitical turmoil will complicate the involvement of the U.S. and Boeing. Here's a look at when the Max may fly again.

U.S. equity futures tumbled with global stocks before paring losses after Iran said it didn't want war. Oil, Treasuries and gold trimmed gains. The pound erased gains before Boris Johnson's meeting with European Commission head Ursula von der Leyen.