Middle East tensions weigh on market

The major averages ended Wednesday just above the flatline as rising tensions in the Middle East weighed on markets.

Re China and China-related stock markets:
As illustrated in the (3-day and one month) Bloomberg charts below for two major markets, volatility remains the central theme as traders and investors seek to converge on a stable consensus regarding the prospects for stimulus measures —… pic.twitter.com/AlKNbwh8N5

— Mohamed A. El-Erian (@elerianm) October 9, 2024

The Dow Jones Industrial Average added 0.01% to close at 5,709.54, while the S&P 500 rose 0.08% to finish at 17,925.12. The Nasdaq Composite Index added 39.55 points, or 0.09%, to conclude trading at 42,196.52. Pressure on the markets came amid a complex geopolitical backdrop.

Significantly lower oil prices today yet still higher yields on US government bonds … #economy #markets #oil #bonds pic.twitter.com/imuE1FkxQ6

— Mohamed A. El-Erian (@elerianm) October 8, 2024

Investors are preparing for more uncertainty as Israel begins a new military escalation, and tensions mount with Iran-backed militant group Hezbollah. Energy prices rose on Wednesday amid this news, boosting energy stocks, which outperformed other sectors. The energy sector was the only S&P 500 category that showed more than a 1% increase for the session.

Just 2 of 11 S&P 500 sectors (Financials and Industrials) joined parent index in hitting all-time highs, but much broader set of factor indices did so: each of QVM Top 90%, Quality, Momentum, Minimum Volatility, High Beta and Buyback reached new records
⁦@SPDJIndices⁩ pic.twitter.com/Bg4UkAsEFu

— Liz Ann Sonders (@LizAnnSonders) October 10, 2024

Lisa Erickson, head of public markets due diligence at U.S. Bank Wealth Management, noted, “We’re really seeing the market have a little bit of a hiccup with this recent spike in geopolitical tensions. While investors typically don’t worry too much about those events until there’s a clear economic impact, we’re just seeing some nervousness.” Economic data also played a role in market movements. ADP data released Wednesday showed job growth in September ahead of Friday’s closely watched nonfarm payroll report, which could influence the Federal Reserve’s next move in its rate-cutting cycle.

Middle East tensions impact markets

In sector news, shares of a leading sneaker company fell 6.8% after announcing upcoming CEO changes. Conversely, deliveries reported by a prominent automaker saw its stock rise by 3.5%. Technology stocks were buoyed by a 1.6% rise in Nvidia, which gained ground after a previous session’s decline. Ryan Detrick, chief market strategist at Carson Group, corrected an earlier misidentification in statements regarding market behaviors, emphasizing the importance of accurate reportage. In global economic outlooks, Citi strategist Scott Chronert is avoiding defensive sectors, which he considers historically expensive, instead favoring energy, banks, and cyclical sectors. Meanwhile, Barclays holds an optimistic view on equities, even as stocks hover near all-time highs during this seasonally poor month. Emmanuel Cau from Barclays noted that the global rate-cutting cycle and China’s stimulus measures keep a soft landing on track. On a broader level, 19 stocks in the major indices hit new 52-week highs on Wednesday, 13 of which reached new all-time highs. Notable mentions include companies trading high since their IPOs in the ’90s and 2000s. Richmond Federal Reserve President Thomas Barkin also weighed in on economic stability, stating that despite supporting aggressive rate cuts in September, it’s too soon to declare economic victory due to ongoing uncertainty. As the market digested various elements, from geopolitical tensions to sector-specific performances, investors maintained a cautious approach heading into the final quarter of 2024.