US equity indexes experienced a downturn as crude oil prices surged after midday on Monday, attributed to reports of a scheduled meeting between Iran and Russia focused on addressing the escalating crisis in the Middle East. The Nasdaq Composite decreased by 0.4%, closing at 18,064.2, while the S&P 500 also fell by 0.4% to reach 5,730.8.
The Dow Jones Industrial Average witnessed a decline of 0.5%, finishing at 42,138.7. The utilities sector led the decliners, with only energy and technology sectors showing signs of advancement. West Texas Intermediate crude oil saw a remarkable increase, rising by 3.6% to $77.07 a barrel. This spike coincided with the one-year anniversary of the terrorist attack on Israel by the Hamas militant group, which occurred on October 7 last year. Ole Hansen, head of commodity strategy at Saxo Bank, noted, ‘Iran's missile attack on Israel last week has raised expectations for a retaliatory strike that would likely serve to weaken Iran's economy through various forms of attack, whether direct or indirect.’ He elaborated that crude oil experienced its largest jump last week since January 2023 due to fears that an assault on Iran's oil and gas industry could tighten supply and potentially escalate the conflict further. In a significant diplomatic move, Russian President Vladimir Putin is scheduled to meet with Iranian President Masoud Pezeshkian on Friday to engage in discussions regarding the Middle East.
According to reports from the Russian state-run media agency TASS, Israel is in coordination with the United States as it prepares to respond to Iran, yet Israeli Defense Minister Yoav Gallant asserted that Israel would be making its own decisions. ‘Everything is on the table,’ Gallant stated, further indicating that he plans to meet with US Defense Secretary Lloyd Austin. The CBOE Volatility Index, often referred to as the fear gauge for investors, surged by 10%, reaching a level of 21.14, reflecting growing uncertainties in the market. In the bond market, US Treasury yields climbed intraday, with the 10-year yield increasing by 4.1 basis points to 4.02%, and the two-year rate rising by 4.9 basis points to 3.98%.
These increases followed a robust nonfarm payrolls report for September, signaling that the labor market may be performing stronger than the Federal Reserve had anticipated in their recent monetary policy communications. The labor flow data indicates that the unemployment rate is projected to average 4.17% in the fourth quarter, which is lower than the Fed's forecast of a year-end jobless rate of 4.4%, according to an analysis from Oxford Economics.
Bernard Yaros, Lead US Economist at Oxford Economics, emphasized, 'This reinforces our baseline view that the central bank will embrace a measured pace of rate cuts.' He also noted that the post-pandemic surge in immigration has resulted in an employment growth trend that exceeded expectations. In corporate news, shares of Supermicro ($SMCI) soared by 14%, making it the top gainer on both the S&P and Nasdaq.
The company reported the shipment of over 100,000 graphics processing units in one quarter, along with the introduction of a comprehensive liquid cooling system for data centers, which includes cooling towers and management software aimed at reducing power and hardware acquisition costs. Meanwhile, Barnes Group ($B) has agreed to be acquired by funds managed by affiliates of Apollo Global Management (APO) in a transaction that values the industrial company at $3.6 billion. In the commodities market, gold prices fell slightly by less than 0.1%, settling at $2,665.01 an ounce, whereas silver dropped by 1.1%, currently priced at $32.06..