US equity indexes fell Thursday afternoon as geopolitical risk in the Middle East escalated following Israel's air strikes on central Beirut, capital of Lebanon, and as concern mounted that the retaliatory action against Iran is coming 'soon.' The Nasdaq Composite fell 0.4% to 17,853.1, with the S&P 500 down 0.4% to 5,684.3 and the Dow Jones Industrial Average 0.7% lower at 41,908.2 after midday Thursday.
Energy and technology were the sole gainers intraday, while consumer discretionary and real estate led the decliners. West Texas Intermediate crude oil surged 5% to $73.67 a barrel. Tensions in the Middle East intensified on Thursday, with Israel conducting air strikes on Beirut and Hezbollah, a terrorist outfit, reportedly carried out attacks on Israeli forces, according to media outlets.
Meanwhile, questions over Israel's response to the Iranian missile barrage are also looming amid the possibility of a retaliatory attack on the country's oil infrastructure. Danny Danon, Israel's ambassador to the United Nations, told CNN that retaliation 'will be soon.' There have been suggestions that Israel could target Iranian oil facilities, which would have the potential to push oil prices significantly higher depending on the scale of the attack.
Iran exports roughly 1.7 million barrels per day of crude oil, so the potential impact is meaningful, ING said in a note. The CBOE Volatility Index, also known as the fear gauge for investors, jumped 9.2% to 20.63. Meanwhile, in US economic news, the Institute for Supply Management's US services index rose to 54.9 in September from 51.5 in August, compared with 51.7 expected in a survey compiled by Bloomberg.
Meanwhile, the S&P Global US services index was revised downward to 55.2 in September, from the 55.4 flash reading, versus no revision anticipated. The September index was below the 55.7 reported in August, but remains in expansion territory as the reading is above the 50 threshold. The ISM services index surprised to the upside in September and is yet another signal that the economy is still expanding at a brisk pace, an Oxford Economics note said.
US initial jobless claims rose sequentially to 225,000 in the week ended Sept. 28 from an upwardly revised 219,000, compared with the 221,000 consensus in a survey compiled by Bloomberg. However, the four-week moving average fell by 750 to 224,250, marking a third straight decline and the seventh drop in the last eight weeks.
While the latest ADP increase of 143,000 versus 125,000 estimated for September was far from robust, the above-consensus reading coupled with little movement in jobless claims reduces the odds for a second-round, more aggressive 50 basis-point cut in November and further increases the focus on Friday's nonfarm payrolls, a Stifel research note said.
Most US Treasury yields rose intraday, with the 10-year yield up 4.5 basis points to 3.83%, and the two-year rate up 5.2 basis points to 3.69%. In company news, Guggenheim adjusted Warner Bros. Discovery's price target to $9 from $12, while maintaining its buy rating. Shares of Warner Bros. were 3.7% lower intraday, among the worst performers on the S&P 500 and the Nasdaq.
RBC Capital Markets raised its price target on Constellation Energy to $272 from $214, while keeping its sector-perform rating. Constellation shares were up 4.9% intraday, among the top performers on the S&P 500. Gold was up 0.4% to $2,679.21 an ounce, and silver climbed 1.5% to $32.39..