Oil Jumps, Stocks Churn as Mideast Fears Intensify: Markets Wrap

(Bloomberg) — US stocks churned as traders weighed the prospect of escalating conflict in the Middle East against positive economic data. Crude oil and the dollar extended gains. 

The S&P 500 and Nasdaq 100 wobbled between small gains and losses after President Joe Biden told reporters he was “discussing” if he would support Israel striking Iran’s oil facilities. 

Crude oil and the US dollar surged after Biden’s comments. Brent crude climbed more than 4% above $76 a barrel, on course for the longest run of daily gains since August, while West Texas Intermediate passed $73. Investors are concerned that, should Israel strike key Iranian assets, the Islamic Republic will lash out and escalate the conflict, dragging in more countries and potentially disrupting global energy shipments.

That’s left US equity benchmarks on course for the first weekly loss in four as the world awaits an Israeli response to Iran’s missile strike. Israel’s warplanes bombed Beirut overnight, after eight of its soldiers were killed in southern Lebanon in battles against Hezbollah.

Equities briefly erased losses after a readout showed the US services sector in September expanded at the fastest pace since February 2023. The Institute for Supply Management’s index of services jumped to 54.9, beating estimates. Readings above 50 indicate expansion. 

Other data showed applications for US unemployment benefits rose slightly last week to a level that is consistent with limited number of layoffs. Continuing claims, a proxy for the number of people receiving benefits, were little changed at 1.83 million in the previous week, according to Labor Department data released Thursday.

The readouts “were both solid in September,” according to JPMorgan Chase & Co.’s Abiel Reinhart. Initial jobless claims “on balance continue to look quite low, which is a good sign for the job market,” he wrote in a research note. 

To Michael Metcalfe, head of macro strategy at State Street Global Markets, international conflict has returned as a driver for markets. “There might be a pressure to rebalance, because markets are stretched and I don’t see that as being particularly positive for US equities,” he said. 

Amid all the geopolitical uncertainty, investors are looking for further signals on the health of the US economy, with the key monthly payrolls report due on Friday. The unemployment rate is forecast to hold steady at 4.2% in September while payrolls are expected to rise by 150,000. 

“I am of course nervous heading into tomorrow’s jobs report,” Kallum Pickering, chief economist at Peel Hunt, said on Bloomberg Television. “If the unemployment rate ticks up, I wouldn’t be surprised that markets would shift back toward expecting 50 basis points and then it is a question of how the Fed may react.” 

BMO’s Vail Hartman expects Friday’s data to leave the Fed’s next move up in the air; “NFP will do no more than raise or lower the bar for the remaining pre-Fed data to justify supersizing the next rate cut.”

Among single stocks, Levi Strauss shares slumped after the apparel company lowered its revenue growth outlook for the full year. Tesla Inc. slid on the departure of a key executive ahead of the unveiling of its driverless robotaxi next week. 

Bloomberg’s dollar index gained for a fourth day, bolstered by the rise in Treasury yields. 

Key events this week: 

• US nonfarm payrolls, Friday

Some of the main moves in markets:

Stocks

• The S&P 500 was little changed as of 12:37 p.m. New York time
• The Nasdaq 100 was little changed
• The Dow Jones Industrial Average fell 0.3%
• The MSCI World Index fell 0.2%

Currencies

• The Bloomberg Dollar Spot Index rose 0.3%
• The euro fell 0.2% to $1.1028
• The British pound fell 1% to $1.3130
• The Japanese yen fell 0.3% to 146.87 per dollar

Cryptocurrencies

• Bitcoin fell 1% to $60,279.32
• Ether fell 2.7% to $2,322.24

Bonds

• The yield on 10-year Treasuries advanced five basis points to 3.83%
• Germany’s 10-year yield advanced five basis points to 2.14%
• Britain’s 10-year yield declined one basis point to 4.02%

Commodities

• West Texas Intermediate crude rose 5% to $73.64 a barrel
• Spot gold was little changed

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Winnie Hsu, John Cheng, Chiranjivi Chakraborty, Robert Brand, Margaryta Kirakosian and Sujata Rao.

©2024 Bloomberg L.P.