U.S. stocks mostly fell on Friday as concerns about war in the Middle East clashed with hopes for stronger profits at major U.S. companies. Oil prices surged and Treasury yields declined after Israel’s military ordered the evacuation of northern Gaza, raising fears of a possible ground invasion and potential “devastating humanitarian consequences.” However, several U.S. banking giants reported better-than-expected profits for the summer, offering hope for an earnings reporting season that may yield the first growth for large companies in a year.
The S&P 500 dropped 0.5%, while the Dow Jones Industrial Average edged up by 0.1% and the Nasdaq composite declined by 1.2%.
The oil market experienced significant movement, with benchmark U.S. crude rising $4.78 to settle at $87.69 per barrel and Brent crude, the international standard, climbing $4.89 to $90.89 per barrel. While Gaza is not a major oil producer, there are concerns that the violence could affect the politics surrounding the crude market and potentially disrupt petroleum flow.
Worries about the war also led to a decline in Treasury yields, as investors sought safer investments during times of stress. The yield on the 10-year Treasury fell to 4.63%. This decline was further compounded by remarks from Philadelphia Fed President Patrick Harker, who suggested that the central bank may be finished with interest rate hikes. Harker stated that the Fed can afford to keep rates steady given the current economic and financial conditions, as there are various uncertainties such as the conflict in Gaza, rising oil prices, workers’ strikes, and potential government shutdowns.
Additionally, a report from the University of Michigan indicated that U.S. consumer sentiment weakened more than expected due to increased concerns about inflation. Consumers are anticipating inflation of 3.8% for the year ahead, the highest reading since May. This could potentially keep the door open for another interest rate hike by the Fed in December or January.
Despite the overall decline in the market, JPMorgan Chase, Wells Fargo, and UnitedHealth Group reported stronger-than-expected profits for the summer quarter. JPMorgan Chase’s profit rose 35% from a year earlier due to a rise in interest rates, although CEO Jamie Dimon cautioned that the world may be entering a dangerous period. Wells Fargo beat analysts’ profit expectations, while UnitedHealth Group’s stock climbed 2.6% after exceeding Wall Street’s profit expectations.
Meanwhile, travel-related companies, such as Norwegian Cruise Line and Delta Air Lines, experienced losses. Investment giant BlackRock also fell, despite reporting stronger profits for the quarter, as investors withdrew funds from long-term investments in favor of cash, which is now offering higher yields.
In summary, the stock market faced downward pressure due to concerns about war in the Middle East, rising oil prices, and uncertainties surrounding inflation and interest rates. However, strong earnings from some major U.S. companies helped cushion the overall decline.
– S&P 500: A stock market index that measures the stock performance of 500 large companies listed on U.S. stock exchanges.
– Dow Jones Industrial Average: A stock market index that represents the performance of 30 large publicly traded companies in the United States.
– Nasdaq composite: A stock market index that tracks the performance of stocks listed on the Nasdaq Stock Market, which is home to many technology and growth companies.
– Treasury yields: The return on investment for Treasury securities, which are debt obligations issued by the U.S. government.
– Inflation: The rate at which the general level of prices for goods and services is rising, eroding purchasing power.
– Federal Reserve: The central banking system of the United States.
– Interest rate: The cost of borrowing money or the return on investment for lending money.
– Earnings: The profits a company generates during a specific period.
Sources: The Associated Press