Interest rate worries and the Israel war
US stock markets are tumbling into the red
October 20, 2023, 11:03 p.m
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Above all, concerns about an expansion of the war between Israel and the terrorist organization Hamas across the entire region are weighing on US stock markets. Investors are increasingly heading for “safe havens”.
The US stock markets continued their decline on Friday. The Dow Jones Index lost 0.9 percent, S&P 500 and Nasdaq Composite gave 1.3 and 1.5 percent respectively. The continued high bond yields and the Middle East conflict acted as inhibitors. Traders saw a connection between the two developments. The Middle East war is fueling oil prices, sparking growing concerns about inflation. The bond market is reacting to this with rising returns. These fell slightly from their recent highs on Friday because investors headed for “safe havens” against the backdrop of the Middle East conflict. The attractive level of returns may also have attracted investors. However, this did not help the stock market, especially since the weekend was just around the corner with potentially new bad news.
“The selloff (in bonds) could be explained by strong retail sales, which followed strong jobs data and higher-than-expected inflation data since the start of the month, both of which fueled hawkish expectations for the Fed,” said Swissquote analyst Ipek Ozkardeskaya. At the Bond market Prices stabilized after their recent decline, but yields remained at a high level. The yield on ten-year US government bonds moved away from the 5 percent mark it last reached in 2007. Without positioning the market for falling key interest rates in the future, SEB analysts said that yields are unlikely to fall significantly. But this is unlikely to happen quickly.
The Oil prices Shares turned negative in late trading on Friday after industry firm Baker Hughes reported a rise in the number of “active” oil production facilities. This suggests that more oil is being produced in the USA.
According to information from the trade, the prices had previously also been driven by reports from the US Navy. A US warship intercepted several missiles fired in Yemen in the Red Sea. A spokesman for the US Department of Defense did not want to rule out that the missiles were aimed at Israel. The Houthi rebels active in Yemen are said to be responsible for the shelling, and they in turn are supported by Iran. Iran had repeatedly threatened to intervene in the Middle East war. Analysts at the Commonwealth Bank of Australia warned against Iran’s intervention in the Middle East war. In this case, the price of oil could quickly rise to $100 a barrel. The prices were also fueled by the US government, which apparently wants to buy oil for the strategic reserve.
The Gold price had recently attracted attention with the headlines about the intercepted missiles. The precious metal remained in demand on Friday as a haven in difficult times. The dollar index fell 0.1 percent as market interest rates returned.
American Express has posted record revenue for the sixth consecutive year as consumers continue to keep their wallets open. The credit card company’s revenue rose 13 percent in the third quarter, meeting analysts’ estimates. Profit even exceeded expectations: it rose by 30 percent. However, the company significantly increased reserves for loan defaults and the share price fell by 5.4 percent.
The titles of SLB (formerly Schlumberger) fell by 2.9 percent. The oil service provider disappointed in terms of sales in the third period, but the result was still better than expected. The profit of the railway company CSX fell in the third quarter as lower transport volumes weighed on earnings. However, the company sees improved business development. The shares rose by 0.7 percent.
Climbed against it Knight Swift Transportation by 11.7 percent. The transportation company reported third-quarter revenue growth that exceeded expectations. Solaredge Technologies has lowered its revenue estimates for the third and fourth quarters after the solar energy company saw more order cancellations and postponements. The share fell by a good 27 percent.