The Dow Jones Industrial Average eked out a narrow gain on Wednesday, adding 39.55 points, or 0.09%, to finish at 42,196.52. The S&P 500 rose 0.08% to 17,925.12, while the Nasdaq Composite inched upwards by 0.01%, reaching 5,709.54. Rising tensions in the Middle East heavily influenced investor sentiment.
Iran’s actions have dampened risk appetite as the new trading month and quarter begin. There are concerns about further uncertainties as Israel confronts escalations involving the Iran-backed militant group Hezbollah. The situation has also driven energy prices higher, causing energy stocks to outperform other sectors.
The S&P 500 energy sector rose more than 1%, marking its fourth consecutive positive session. Lisa Erickson, head of public markets due diligence at U.S. Bank Wealth Management, said, “We’re seeing the market have a bit of a hiccup with this recent spike in geopolitical tensions. Investors typically don’t worry too much about these events until there’s a clear economic impact, but we’re just seeing some nervousness.”
On the economic front, a report from ADP showed job growth in September, coming ahead of Friday’s highly-anticipated nonfarm payroll report.
This data could significantly influence the Federal Reserve’s next steps, as the central bank’s rate cutting cycle progresses.
Middle East tensions impact markets
In sector-specific news, Nike saw a decline of 6.8% following the announcement of an impending CEO change.
Tesla dropped by 3.5% after the company reported its delivery numbers, although the broader technology sector was buoyed by a 1.6% rise in other stocks. Nvidia clawed back some of its losses from the previous day, rising 1.5% to aid in stabilizing the broader market indexes. However, the stock has been down over the past three months as the momentum from the artificial intelligence trade appears to be waning.
Ryan Grabinski of Strategas Securities noted that U.S. equities have historically benefited from Chinese stimulus. “Periods of expanded credit impulse measures have typically seen the S&P 500 advance by a median of 15%,” he said. Citi’s Scott Chronert voiced a preference for avoiding defensive assets despite rising volatility, citing that these parts of the market are historically expensive.
Instead, he’s bullish on energy, banks, and cyclical sectors. Emmanuel Cau from Barclays maintains an optimistic outlook on equities despite current high valuations, believing that global rate cuts and Chinese stimulus measures will keep a soft landing on track. Lastly, 19 stocks in the S&P 500 reached new 52-week highs on Wednesday, with notable mentions including ExxonMobil and Alphabet.
However, Nvidia remains a focal point, as it tries to regain some footing following the previous day’s losses due to slowed data center demand.
