Stocks declined around the world, bonds climbed and oil hit $90 a barrel amid investor concern that the Israel war with Hamas will escalate into a wider conflict in the Middle East.
(Bloomberg) — Stocks declined around the world, bonds climbed and oil hit $90 a barrel amid investor concern that the Israel war with Hamas will escalate into a wider conflict in the Middle East.
The S&P 500 dropped almost 1%, briefly breaching its 200-day moving average — seen by some chartists a harbinger of more losses. Wall Street’s “fear gauge” — the VIX — rose to its highest since March. Banks underperformed as Regions Financial Corp. warned of further declines in net interest income. American Express Co. sank on disappointing volumes on its cards. Megacaps also sold off, with Tesla Inc. set for its worst week since December.
The conflict in the Middle East is adding to demand for haven assets. Treasury yields pared weekly increases that pushed the 10-year rate to almost 5% as investors showed interest in bonds at multiyear highs. Gold extended its advance.
Israel’s military said it struck Hamas targets in Gaza overnight and responded to fire from Lebanon by hitting Hezbollah assets. The Iran-backed militant group said it fired guided missiles at several Israeli sites. The US, meanwhile, said its military bases in Iraq and Syria are increasingly under attack. Leaders from around the region prepare to gather in Cairo for a summit on the crisis.
“The ongoing situation in the Middle East has triggered a surge of volatility in the oil and stock markets, compelling investors to re-evaluate their strategies and shift their focus from riskier assets to ‘safer’ investments,” said Fawad Razaqzada, market analyst at City Index and Forex.com.
Read: Oil Angst Only Gets Worse as Iran Question Festers: Surveillance
The US stock market has been whipped around in recent weeks by rising geopolitical concerns, climbing Treasury yields and growing worries about interest rates staying elevated for longer. Traders also had to wade through a raft corporate earnings.
Of the 86 companies in S&P 500 that have announced results through Friday morning, 74% beat analysts’ profit estimates, compared with 78% for the whole season a year ago, according to data compiled by Bloomberg.
While the S&P 500’s declines this week have appeared largely orderly, the nearest futures contracts tied to the Cboe Volatility Index — also known as the VIX and a measure of expected swings in America’s benchmark equity gauge — closed Thursday in a pattern known as backwardation. It’s a telltale sign of mounting distress, as traders anticipate more volatility in the near-term than further out in the future.
Read: VIX Is in Backwardation! Here’s Why and What It Means: QuickTake
Meantime, oil traders are continuing to snap up bullish options contracts as risks mount of an escalation in the war between Israel and Hamas.
The number of call options traded has outpaced the volume of bearish puts every day for almost a month, according to ICE Futures Europe data compiled by Bloomberg. That’s the longest such run since February.
“Risk aversion heading into the weekend is pushing oil prices higher,” said Craig Erlam, senior market analyst at Oanda. The potential for the war to become more widespread “is making traders nervous and adding a significant risk premium to oil prices at a time when the market is already extremely tight,” he noted.
- SLB, the biggest oil-services provider, posted its first sequential dip in North American sales since the start of 2021 as explorers ramp up spending in the Middle East and elsewhere in the world.
- Solar stocks tumbled after SolarEdge Technologies Inc. warned that third-quarter revenue will be well below its guidance, citing “substantial” cancellations and delayed orders.
- Merck & Co. agreed to buy the rights to sell Daiichi Sankyo Co.’s three experimental cancer drugs, looking to sustain its dominance in treatment of the deadly disease.
- Jazz Pharmaceuticals Plc is exploring strategic options including a potential sale, people with knowledge of the matter said.
Some of the main moves in markets:
- The S&P 500 fell 0.8% as of 12:01 p.m. New York time
- The Nasdaq 100 fell 1.1%
- The Dow Jones Industrial Average fell 0.4%
- The Stoxx Europe 600 fell 1.4%
- The MSCI World index fell 0.8%
- The Bloomberg Dollar Spot Index was little changed
- The euro was little changed at $1.0589
- The British pound was little changed at $1.2149
- The Japanese yen was little changed at 149.85 per dollar
- Bitcoin rose 2.9% to $29,551.52
- Ether rose 2.5% to $1,605.7
- The yield on 10-year Treasuries declined eight basis points to 4.91%
- Germany’s 10-year yield declined four basis points to 2.89%
- Britain’s 10-year yield declined two basis points to 4.65%
- West Texas Intermediate crude rose 0.9% to $90.16 a barrel
- Gold futures rose 1.1% to $2,003.10 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Yongchang Chin and Alex Longley.
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