Stock Losses Deepen as S&P 500 Breaches Key Level: Markets Wrap

Rita Nazareth
·4 min read
1

(Bloomberg) -- Stocks fell around the world, while bonds climbed with gold on concern the Israel-Hamas war will escalate into a wider conflict in the Middle East. Oil pulled back after hitting $90 a barrel.

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The S&P 500 dropped over 1%, notching its worst week in a month. It breached the 200-day moving average — seen by some chartists as a bearish signal. Wall Street’s “fear gauge” — the VIX — hit the highest since March. US airline shares posted their longest weekly slide in over two years as major carriers dial back forecasts in the face of elevated oil prices and wages.

Read: Bond Market’s Bad Tidings Start to Overwhelm Miracle Stock Rally

Traders continued to seek haven amid the latest geopolitical developments. Treasury yields pared weekly increases that pushed the 10-year rate to almost 5%. Gold edged closer to $2,000 an ounce.

“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.

Hamas released two American citizens who had been held captive in Gaza. Leaders from around the region are heading to Cairo for a Saturday summit on the crisis. Israel’s military said it struck Hamas targets in Gaza overnight. Israel also responded to fire from Lebanon by hitting Hezbollah assets, and evacuated residents near the border. The Iran-backed militant group said it fired guided missiles at several Israeli sites.

Aside from the Middle East crisis, global markets have been whipped around in recent weeks by climbing Treasury yields and growing worries about interest rates staying elevated for longer.

Federal Reserve Bank of Cleveland President Loretta Mester said the US central bank is close to wrapping up its tightening campaign if the economy evolves as expected.

Corporate Earnings

Traders also waded 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.

Individual shares reacted to earnings announcements in the week or so since Corporate America started reporting results. But conflict in the Middle East and elevated Treasury yields have taken precedence, causing S&P 500 constituents to increasingly move in unison as global events sway markets broadly.

In half the trading sessions since Oct. 13, when the reporting cycle kicked off, at least 400 members in the S&P 500 have moved in the same direction. It’s a frequency that didn’t appear once in comparable weeks the past three earnings periods.

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

Corporate Highlights

  • American Express Co. saw volumes on its cards slow faster than expected in the third quarter as small business and corporations alike pulled back on their spending on the firm’s cards.

  • Regions Financial Corp. slumped after warning it expects further declines in net interest income as higher rates continue to take a toll on the bank.

  • United Auto Workers President Shawn Fain said Friday that the union had received better offers from Detroit’s three carmakers, but there was “more to be won.”

    • Stellantis NV, General Motors Co. and Ford Motor Co. have all offered 23% raises, Fain said in a livestream broadcast to members.

Some of the main moves in markets:

Stocks

  • The S&P 500 fell 1.3% as of 4 p.m. New York time

  • The Nasdaq 100 fell 1.5%

  • The Dow Jones Industrial Average fell 0.9%

  • The MSCI World index fell 1.1%

Currencies

  • The Bloomberg Dollar Spot Index was little changed

  • The euro rose 0.1% to $1.0593

  • The British pound rose 0.1% to $1.2160

  • The Japanese yen was little changed at 149.85 per dollar

Cryptocurrencies

  • Bitcoin rose 2.9% to $29,556.5

  • Ether rose 2.5% to $1,606.36

Bonds

  • 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%

Commodities

  • West Texas Intermediate crude fell 0.7% to $88.75 a barrel

  • Gold futures rose 0.6% to $1,991.80 an ounce

This story was produced with the assistance of Bloomberg Automation.

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