The S&P 500 and Nasdaq closed lower on Friday due to a sharp fall in consumer sentiment data and concerns over the Middle East conflict, which overshadowed positive earnings reports from major U.S. banks. The three major indexes of Wall Street initially opened higher but lost momentum following the release of preliminary data showing a decline in consumer sentiment for October.
Investors were also closely following developments in the Middle East. Israel announced that it had conducted raids inside the Gaza Strip, marking a shift to ground operations against Hamas fighters. The United Nations expressed concerns about the devastating humanitarian consequences that could arise from Israel’s call for Gaza civilians to evacuate.
In response to these developments, U.S. Treasury prices rose as investors sought safer assets, while the price of U.S. crude oil climbed more than 5%. Lauren Goodwin, an economist and portfolio strategist at New York Life Investments, noted that these movements reflected a more risk-off sentiment due to worries about deteriorating consumer sentiment, the global economy, and geopolitical conflicts.
Despite the negative sentiment, Goodwin suggested that the current market mood may not indicate the beginning of a troubled market unless there is a significant escalation in the Middle East conflict. She explained that shifts in market leadership and narratives are common during this stage of the economic cycle.
Preliminary data revealed that the S&P 500 closed 0.49% lower at 4,328.34 points, and the Nasdaq Composite dropped 1.23% to 13,407.23 points. However, the Dow Jones Industrial Average managed to rise by 0.13% to 33,673.39 points.
Energy stocks led gains among the S&P’s 11 major industry sectors, driven by the rise in oil prices. Defensive sectors, such as utilities, also performed well during the session. Safe-haven assets, including gold, also saw a rally.
While JPMorgan Chase, Wells Fargo, and Citigroup reported better-than-expected quarterly profits, the S&P 500 Banks index pared some of its gains as the session progressed. Federal Reserve Bank of Philadelphia President Patrick Harker suggested that the central bank is likely finished with its rate-hiking cycle, as inflation pressures have eased.
In terms of individual stocks, asset manager BlackRock experienced a decline in net inflows for the third quarter. On the other hand, UnitedHealth exceeded profit estimates for the same period. Dollar General saw a rally after reappointing former CEO Todd Vasos to replace the current Chief Executive Jeff Owen. Boeing, however, faced a decline following expanded inspections of a production defect affecting 737 Max 8 aircraft, along with Spirit AeroSystems.
In conclusion, weak consumer sentiment data and the Middle East conflict weighed down the S&P 500 and Nasdaq, overshadowing strong earnings from U.S. banks. Concerns about the global economy and geopolitical tensions also impacted investor sentiment, leading to moves towards safer assets such as U.S. Treasury bonds and gold.
Definitions:
– S&P 500: A stock market index that measures the stock performance of 500 large companies listed on U.S. stock exchanges.
– Nasdaq: A stock exchange that primarily lists technology companies and is known for its high-tech and growth-oriented companies.
– Consumer sentiment: A measure of consumer confidence in the overall state of the economy, which can affect consumer spending behavior.
– Middle East conflict: Refers to the ongoing geopolitical tensions and conflicts in the Middle East region, including disputes between Israel and its neighboring countries.
– Wall Street: Refers to the financial district in New York City and is often used as a synonym for the U.S. financial industry.
– U.S. Treasury: Refers to the U.S. Department of the Treasury and its financial instruments, including Treasury bonds, bills, and notes.
– Crude oil: A raw material that is processed into petroleum products and is a key global commodity.
– Federal Reserve: The central bank of the United States responsible for monetary policy and regulating the country’s banking system.
– Inflation: The rate at which the general level of prices for goods and services is rising, eroding purchasing power.
– Asset manager: A financial professional or firm that manages investments on behalf of clients.
– Dow Jones Industrial Average: A stock market index that measures the stock performance of 30 large companies listed on U.S. stock exchanges.