The sudden shock of U.S.-Israeli air strikes against Iran that began Saturday, Feb. 28, has Michigan investors on edge wondering what’s next for auto stocks, their 401(k) plans and more.
As expected, auto stocks took a blow in trading Monday morning. Detroit Three stock prices moved down rapidly, fluctuating by the minute.
Ford Motor Co. stock dropped 4.04% early on to trade at $13.52 a share, down 57 cents a share around 9:35 a.m.
General Motors Co. stock dropped 3.76% to trade at $75.73 a share, down $2.96 a share after 9:35 a.m.
Stellantis stock dropped 5.82% to trade around $7.62 a share, down 47 cents a share after 9:35 a.m.
The Dow Jones Industrial Average was down 0.91% or 443.37 points after 9:40 a.m. to trade at 48,534.55 points.
Before 10:54 a.m., the Dow recovered some and was down 0.43% or down 208.8 points But auto stocks stayed much further in the red zone with Stellantis down 6.12%, Ford down 5.64% and GM down 2.85% around 10:52 a.m. Monday, March 2.
Oil and gold prices surge as markets react
Not surprisingly, gold prices and oil prices soared as the air war against Iran escalated.
Sam Stovall, chief investment strategist for CFRA Research, told the Detroit Free Press that he would expect that it is too early to know how widespread the conflict will become. Futures markets early Monday morning seemed to indicate that the stock market overall might maintain a relative calm.
His overall general advice to investors: “Don’t let your emotions become your portfolio’s worst enemy.”
Analysts say recession unlikely, but gas prices may rise
David Sowerby, managing director and portfolio manager for Ancora Advisors in Bloomfield Hills, told the Free Press that higher gas prices at the pump are likely to drive down consumer sentiment and hold back big-ticket purchases in the near term. Many consumers also are less likely to travel, especially when it comes to taking a cruise, he said.
Sowerby said he does not believe the heightened military actions in the Middle East will drive the U.S. economy into a recession.
Investors might prepare for a 5% to 7% decline in stock prices as worries mount, Sowerby said. But he pointed out that such a decline is not unusual, given that 5% market drops occur about two or three times in a single calendar year.
Sowerby said early stock trading on Wall Street has been generally holding up better than some might have expected. “But it’s still very early,” Sowerby said shortly after 10 a.m. Monday.
When it comes to auto stocks, some analysts say the U.S. auto industry is not likely to be in trouble due to the war in Middle East at this point.
The risks are mostly around broader macroeconomic concerns that could trigger a recession or the possible impact of sustained high gas prices on consumers, according to Morningstar auto analyst David Whiston.
Much could depend on how high gas prices go at the pump, and how long they stay high.
Some consumers might go back to electric vehicles or even try an EV for the first time, if gas prices stayed high, Whiston said.
Whiston said consumers might shift back to car models, though there aren’t many car models anymore, and away from popular light trucks and SUVs if gas prices soared to $6 a gallon and higher.
The most likely fall out, Whiston said, will be higher gas prices for at least a short while. He sees a risk that gas prices could go far higher than where they are presently, depending on how the conflict in the Middle East unfolds.
Michael Greiner, assistant professor of management at the Oakland University School of Business Administration, said he would not be surprised to see oil topping $100 per barrel if it goes four or five weeks as President Donald Trump is suggesting. Brent crude was up Monday, trading at nearly $79 a barrel.
“The economy is in a bit of a scary place,” Greiner said.
“Right now, stocks are trading with a price-earnings ratio of 29 to 1, a near historic high. This to me indicates that we are in the midst of a bubble,” Greiner told the Free Press on Monday morning.
“Could a slowdown started by an oil shock burst the bubble? The market seems to think so, given the decline in stocks and the increases in gold and treasuries. Obviously, the market is fleeing from riskier assets to more secure ones.”
Greiner said he’s concerned about the Michigan economy being hit harder than other states. “A decline in auto demand due to an oil price shock will hurt auto manufacturers hard,” Greiner said.
Contact personal finance columnist Susan Tompor: stompor@freepress.com. Follow her on X @tompor.
This article originally appeared on Detroit Free Press: Ford, GM, Stellantis stocks slide after U.S.-Iran strikes hit markets
Reporting by Susan Tompor, Detroit Free Press / Detroit Free Press
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