The immediate US financial market reaction to media reports of a heightened risk of further escalation of the conflict in the Middle East include
Lower stocks (0.8-2%),
Fall in government bond yields (5-7bps), and
Higher oil prices (3%).
What may surprise some: Lower prices…— Mohamed A. El-Erian (@elerianm) October 1, 2024
Iran fired over 100 ballistic missiles at Israel on Tuesday, pushing oil prices for West Texas Intermediate (WTI) and Brent to their biggest increases in nearly a year. The tech-heavy Nasdaq Composite led the stock market declines, shedding around 1.5%. The Dow Jones Industrial Average moved about 0.4% lower, while the benchmark S&P 500 finished the day down roughly 0.9%.
#NewsFatafat | Wall Street closed with losses as mounting Middle East tensions weigh on markets. All benchmark indices ended in the red #WallStreet #MarketUpdate #MiddleEastTensions #StockMarket pic.twitter.com/L7ncm3rr3o
— ET NOW (@ETNOWlive) October 2, 2024
Job openings surprisingly increased in August, with 8.04 million jobs open at the end of the month, up from 7.71 million in July. Despite this, the labor market displayed signs of cooling. The Institute for Supply Management (ISM) reported its manufacturing PMI was unchanged at 47.2 last month.
Although steady, the reading indicates a contraction, as a PMI below 50 signals a shrinking manufacturing sector. On Tuesday, Nike stock dropped around 2% lower in after-hours trading after the company’s first-quarter earnings beat expectations. The shoe giant reported first-quarter earnings per share of $0.70, surpassing Wall Street’s expectations of $0.52.
Global Market | USA: Markets closed lower on Tuesday as investors remained cautious after Iran fired missiles at Israel 📉
Nasdaq Composite down 1.5%, DJIA down 0.41%, and S&P 500 down 0.9%#StockMarket #Nasdaq #DJIA #SP500 #MarketUpdate pic.twitter.com/nLs8qdi5fJ
— ET NOW (@ETNOWlive) October 2, 2024
Oil prices climb as Iran missile attack prompts supply fears https://t.co/Gr05WyrgdN via @ft
— Linda Yueh (@lindayueh) October 2, 2024
Iran missile attack spikes oil prices
However, Nike’s revenue of $11.59 billion fell short of analyst estimates of $11.65 billion. Oil prices spiked significantly on Tuesday following the Iran-Israel conflict.
West Texas Intermediate rose more than 3% to trade just above $70 per barrel, and Brent climbed roughly 3% to hover around $74 per barrel. James Reilly, senior markets economist at Capital Economics, noted that the impact on oil prices remains a significant transmission channel to the global economy. He mentioned that Iran’s potential escalation could involve the US, posing additional risks.
Energy and utilities sectors led the day’s sector action, up about 1.8% and 0.4%, respectively. Energy saw a significant boost after crude oil prices jumped about 4%. Americans quit their jobs at the lowest rate since June 2020, further cooling the labor market.
Super Micro Computer fell more than 3% after a 10-for-1 stock split and an ongoing investigation by the US Department of Justice for potential accounting violations. Investors will closely watch Friday’s September jobs report to look for further signs of the US economy’s direction.
