Wall Street flat on lingering suspense about Gaza war pause

On Friday, Wall Street Futures jumped on hopes of an Israel-Hamas/Gaza humanitarian pause and also a Fed pause and an early rate cut by June’24 (instead of earlier Sep’24 assumption by the market). Although U.S. Foreign Secretary Blinken is trying for some compromise/humanitarian pauses and meeting almost all the stakeholder states/countries in the Middle East, Israel is not ready for a ceasefire until all the hostages are released by Hamas.

But the good news is that despite growing global pressure on Israel for a ceasefire, and the genocide-like situation in Gaza coupled with an increasing confrontation with Hezbollah in the Lebanon border, so far U.S. has been able to ensure no wider regional conflict/war involving Iran. So far around 10K people killed in Gaza by Israel's attack since 7th October, when more than 1400 people were killed by Hamas’s unprecedented/surprising rocket attacks in Israel. Hamas has now around 225-250 hostages from Israel after that heinous attack on 7th October.

Overall, after almost 30 days of relentless bombings in Gaza, Hamas terror infra is now almost destroyed, but Israel (IDF/Mossad/CIA/US) is not able to rescue those captive hostages, believed to be under the HQ tunnel of some prominent hospitals. Israel now wants to destroy or secure those hospitals to rescue hostages but is not able to do so because of global outcry. On the weekend, an Israeli cabinet minister even called for nukes to destroy the Gaza strip, but he was also immediately suspended by the Israel War cabinet headed by PM Netanyahu and prominent opposition leaders including Lipid.

On Monday, the U.S. Defense Department Spokesman Kirby said:

·         President Biden and PM Netanyahu agreed to speak again in the coming days

·         Biden and Israel's Netanyahu discussed the potential for tactical/humanitarian pauses

·         The US still does not believe a general ceasefire is appropriate at this time

As per White House presser: Readout of President Biden’s Call with Prime Minister Netanyahu of Israel

“President Joseph R. Biden, Jr. spoke this morning with Prime Minister Benjamin Netanyahu of Israel regarding the latest developments in Israel, Gaza, and the West Bank. The President and the Prime Minister discussed ongoing efforts to secure the release of hostages held by Hamas, including many children and a number of American citizens.  The two leaders welcomed the increase in humanitarian assistance over the past week and discussed the necessity to significantly ramp up deliveries over the coming week, including by increasing the capacity to screen and stage trucks going into Gaza.  The President reiterated his steadfast support for Israel and the protection of Israeli citizens from Hamas and all other threats while also emphasizing the imperative to protect Palestinian civilians and reduce civilian harm in the course of military operations. The two leaders discussed the possibility of tactical pauses to provide civilians with opportunities to safely depart from areas of ongoing fighting, to ensure assistance is reaching civilians in need, and to enable potential hostage releases.  The President also discussed the situation in the West Bank and the need to hold extremist settlers accountable for violent acts. They agreed to speak again in the coming days.”

Biden has faced widespread criticism and protests across the U.S., including in Washington, DC, for failing to call for a humanitarian ceasefire in Gaza. Instead, his administration is pushing for “humanitarian pauses”, while Netanyahu has said he won’t consider any pause in the fighting until all the captives held in Gaza are released. Netanyahu is also under immense pressure back home for the failure to rescue hostages and his mismanagement of the overall situation.

Both Israel and the U.S. are now maintaining that any ceasefire at this stage may help Hamas to reorganize and relocate. Israel now prefers a ceasefire only after securing all the hostages. On Monday, Israel PM Netanyahu said ‘all civilized powers’ should back Israel in war. Speaking to a meeting of foreign ambassadors, the Israeli PM termed the Gaza war as a global conflict against an “axis of terror” led by Iran:

“This is not a local battle. This is a global battle---We will defeat Hamas. We will dismantle Hamas. We will offer the people of Gaza and the entire peoples of the Middle East [a] real future, a future of promise and hope, but this requires victory. We believe that all civilized powers should back us in this effort because this battle is your battle and our victory is your victory.”

The U.S. is now also preparing for regional war escalation and containment thereof; it has stationed a guided missile submarine recently in addition to earlier two aircraft carriers and at least 1000 special operation soldiers (private or marines) in the region and also assisting Israel actively to locate Hamas terror networks in a bid to locate/rescue hostages. Apart from the diplomatic effort to ensure back-channel talks with Hamas (through Qatar mediation) to free hostages, the U.S. CIA director Burns is also visiting Israel and other related Middle Eastern countries/stakeholders to ensure the release of hostages by Hamas. The U.S. / CIA is also trying for more targeted Gaza military/surgical operations to destroy the Hamas terror network/infra and the release of hostages rather than indiscriminate civilian casualties. The U.S. is also providing laser-guided precision bombs/missiles to destroy deep underground Hamas terror tunnels infra.

On Monday, a U.S. official said: “Director Burns is traveling to several countries in the Middle East, where he is meeting with multiple intelligence counterparts and country leaders. They will discuss issues of mutual concern, including the situation in Gaza, support for hostage negotiations and the US commitment to continuing to deter state and non-state actors from widening the conflict between Israel and Hamas. The director will reinforce our commitment to intelligence cooperation, especially in areas such as counterterrorism and security.”

Overall, the U.S. is now trying to rescue hostages ASAP with targeted military operations by IDF and also private U.S. mercenaries and marines amid increasing global outcry over civilian caustics in Gaza/West Bank). Thus Wall Street is getting some boost, while US bonds and gold slip

Market wrap:

On Monday, Wall Street Futures were muted amid lingering suspense about the Gaza war pause/ceasefire. But Wall Street was also boosted by Biden’s plan for infra stimulus through the creation of infra for high-speed railway (HSR) network in the U.S. (worth trillions of dollars). Such HSR projects, if eventually approved by the U.S. Congress will create thousands of well-paid construction jobs, a huge demand for metals and allied commodities/materials and will also ensure greener transportation as the general public will avoid roads and even air travel for an affordable journey in electric HSR Although U.S. is now far behind China in terms of HSR transportation infra, Biden is now trying to employ Chinese model of growth and may be also a big boost for the overall U.S. economy.

On Monday, Wall Street was boosted by techs, healthcare, consumer discretionary, consumer staples, and communication services, while dragged by real estate, energy, materials, utilities, banks & financials, and industrials. Dow Jones was boosted by Apple, Amgen, Microsoft, Merck, JPM, IBM, and United Health, while dragged by Walgreens Boots, Walt Disney, Goldman Sachs, Boeing, Verizon, Caterpillar and Chevron. NQ-100 dragged by Tesla on German plant expansion M&A, while supported by Amazon.

Technical trading levels: DJ-30, NQ-100 Future, and Gold

Whatever the narrative, technically Dow Future (34150), now has to sustain over 34300 for any further rally to 34500/34650 and 34855 and further to 35375-35875 in the coming days (if there is a Gaza ceasefire/Israel ends its intensifying surgical/military operation).; on the other side, sustaining below 34250, Dow Future may again fall to 33950/33650-33450/33150 and 32950/32650-32300/32200 and 32000/31750-31595/31190 and even 29400-28475 levels (in case of a wider major regional military conflict).

Similarly, NQ-100 Future (15222), now has to sustain over 15350 for any further rally to 15455/15500 and further 15625/15750-15975/16075 in the coming days; otherwise sustaining below 15300, NQ-100 may again fall to 15100/15000 and 14800/14600-14450/14300-14200/14100 and 14000/13800-13650/13500-13395/12990 and 12790/12400-12180/11650 and even 11000-10675 in the coming days. (under the worst scenario of Gaza regional war).

Technically, Gold (XAU/USD: 1978) now has to sustain over 1980/1995-2008/2012 for a further rally to 2022/2038-2055/2085; otherwise sustaining below 1975/1973-1965/1950 may further fall to 1945/1934-1924/908 and further 1894-1805 in the coming days (if there was a Gaza war pause/ceasefire).