The US benchmark equity indexes experienced a decline on Monday, coinciding with a notable surge in oil prices, amidst ongoing uncertainties regarding the geopolitical situation in the Middle East. Specifically, the Nasdaq Composite decreased by 1.2%, settling at 17,923.9, while the S&P 500 fell by 1% to 5,695.9.
The Dow Jones Industrial Average showed a loss of 0.9%, closing at 41,954.2. Among the various sectors, utilities experienced the steepest decline of 2.3%, whereas energy stood out as the sole sector to gain ground on this turbulent day. In the commodities market, West Texas Intermediate crude oil saw an impressive increase of 4%, reaching $77.35 a barrel, while Brent crude advanced by 3.9%, hitting $81.10.
This upward trajectory can be attributed to rising fears surrounding potential Israeli retaliation against Iran. Analysts from Saxo Bank issued a report on Monday indicating that concerns over a possible strike on Iran's oil and gas sector could lead to tighter supply and escalate the already precarious conflict in the region.
In a related development, reports have emerged indicating that at least 10 firefighters lost their lives in an Israeli air strike in a border area of southern Lebanon, as cited by the Lebanese health ministry. This incident follows Iran's missile assault on Israel, which was executed in retaliation for the recent killing of Hezbollah chief Hassan Nasrallah, along with an Iranian commander within Lebanese territory.
In the bond market, the yield on the US two-year treasury note rose by 6.1 basis points, reaching 3.99% on Monday. Meanwhile, the 10-year treasury rate added 4.5 basis points, climbing to 4.03%. Predictions based on official data suggest that consumer inflation in the US is expected to show a 0.1% increase sequentially, along with a 2.3% rise on an annual basis for last month, according to consensus data compiled by Bloomberg.
Furthermore, the US producer prices report for September is set for release this coming Friday. On the employment front, a report released on Friday by the Bureau of Labor Statistics indicated that the economy added more jobs than anticipated last month, while the unemployment rate saw a slight decrease.
Stifel noted in a Monday client correspondence that 'a significantly stronger-than-expected employment report not only calls into question the Federal Reserve's recent decision for an outsized rate cut in September, but also raises doubts about the magnitude of further rate cuts that may be required moving forward.' In a different context, Wells Fargo Investment Institute expressed skepticism regarding market optimism concerning the Federal Reserve's monetary-policy easing strategies.
Their analysis indicates that Fed funds futures are predicting an additional 200 basis points in interest rate cuts by the end of 2025. This comes after last month’s decision by the Federal Open Market Committee to reduce its benchmark lending rate by 50 basis points, whereas a Bloomberg-compiled consensus had anticipated a smaller cut of 25 basis points.
Turning to individual companies, shares of Deckers Outdoor ($DECK) dropped 4.8%, marking one of the most significant declines within the S&P 500, following a downgrade from Seaport Global, which adjusted their rating from buy to neutral. In a significant acquisition move, Barnes Group ($B) has agreed to be acquired and taken private by funds managed by affiliates of Apollo Global Management ($APO), in a deal which places the valuation of the industrial company at approximately $3.6 billion.
As a result, shares of Barnes rose by 2.7%, although Apollo shares fell by 0.8%. Impressively, Super Micro Computer ($SMCI) shares surged nearly 16%, becoming the best performer across both the S&P 500 and Nasdaq after the announcement of the deployment of over 100,000 graphics processing units in a single quarter.
Additionally, in the precious metals market, gold experienced a slight decline of 0.2%, reaching $2,661.80 per troy ounce, while silver saw a drop of 1.4%, settling at $31.96 per ounce..