US benchmark equity indexes experienced declines intraday, while oil prices surged significantly amidst escalating geopolitical tensions in the Middle East. This market reaction highlights the complex interplay between global events and financial markets. The Dow Jones Industrial Average saw a decrease of 0.7%, settling at 41,913.4 by midday Thursday.
Similarly, the S&P 500 fell by 0.4% to reach 5,687.8, and the Nasdaq Composite dropped by 0.3%, closing at 17,880.8. Among various sectors, consumer discretionary faced the most significant decline, while the energy sector emerged as the leading gainer in this volatile market. Responding to inquiries from reporters about whether the US would support Israeli actions against Iranian oil facilities, President Joe Biden indicated that discussions were ongoing.
"There's nothing going to happen today," Biden clarified, alluding to the sensitive geopolitical climate. Concerns have been raised that Israel might target Iran's oil industry in retaliation for a missile attack from Tehran earlier in the week. As a result, West Texas Intermediate crude oil prices spiked by 4.9%, reaching $73.55 a barrel intraday, reflecting the heightened tensions in the region. On the economic front, two reports presented a mixed overview of the US services sector for September.
The Institute for Supply Management's data indicated a better-than-expected expansion in activity, while the S&P Global report signaled a slowdown in growth. "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," commented analysts from Oxford Economics. Furthermore, data released on Tuesday revealed that the US manufacturing sector remained in contraction territory last month amid soft demand and a decline in employment figures.
In terms of labor market dynamics, weekly applications for unemployment insurance in the US rose more than anticipated, according to government data provided on Thursday. In terms of job cuts, US-based employers reported a total of 72,821 job reductions last month, reflecting a 4% decline from August and a significant 53% increase from September 2023, according to Challenger Gray & Christmas.
Analysts are eagerly awaiting data from the Bureau of Labor Statistics, expected to be released on Friday, which is anticipated to show that the US economy added 150,000 nonfarm jobs last month—a clear acceleration from the 142,000 jobs added in August, as per a survey compiled by Bloomberg. In the bond market, the US two-year yield rose by 5.4 basis points, reaching 3.69% intraday, while the 10-year rate increased by 4.7 basis points to 3.83%.
This movement in yields reflects the ongoing adjustments in market expectations regarding economic growth and inflation. Turning to individual company performances, Constellation Brands' fiscal second-quarter earnings beat market estimates, although its revenue fell short of Wall Street expectations due to a significant $2.25 billion noncash goodwill impairment loss in its wine and spirits division.
As a result, shares of Constellation Brands declined by 4.3%, marking the steepest drop on the S&P 500 index. In contrast, Tesla was among the worst performers on both the S&P 500 and the Nasdaq, with shares down 3.6%. The electric vehicle manufacturer recently removed its most affordable Model 3 sedan from its US order page, signaling the impact of new tariffs on Chinese imports—a situation deemed a "double-edged sword" for US automakers, according to Wedbush Securities. In a contrasting view, Vistra shares surged by 6.3%, making it the top gainer on the S&P 500, as RBC raised its price target for the stock from $105 to $141 while maintaining an outperform rating. Meanwhile, precious metals saw an uptick, with gold prices rising by 0.4% to $2,680.30 per troy ounce, while silver prices increased by 1.7% to $32.47 per ounce..