Stocks finished lower Monday. while oil prices and Treasury bond yields surged as investors looked to reset market forecasts following last week's blowout jobs report and the expanding military tensions in the Middle East.
The Dow Jones Industrial Average fell 398.51 points, or, 0.94%, to end the session at 41,954.24, the S&P 500 lost 0.96% to 5,695.94, and the tech-heavy Nasdaq dropped 1.18% to finish the day at 17,923.90.
Adam Turnquist, chief technical strategist for LPL Financial, said that Treasury yields rerated higher after Friday’s employment report delivered an upside surprise to payrolls and an unexpected downtick in unemployment.
“Expectations for another 0.50% rate cut from the Fed diminished quickly after the release,” he said. “Rising oil is also pushing yields higher as tensions in the Middle East escalate.”
Turnquist said the threat of an attack on Iranian production has helped West Texas Intermediate jump over 10% this month, putting upward pressure on inflation and interest rates.
Updated at 2:41 PM EDT
Wall Street worry?
Stocks are extending their early session declines heading into the final hours of trading, with the S&P 500 down 46 points, or 8% and the Nasdaq falling 187 points, or 0.88%
Market volatility, meanwhile, continues to move higher, with the Vix index rising 13% on the session at $21.70, a level that suggests daily swings of 1.36%, or 77 points, each day for the next month.
"While the longshoremen strike was resolved surprisingly fast, the Mideast conflict remains hot, elevating energy prices, the Ukraine war appears to be unchanged despite massive spending, and the devastating storm damage in North Carolina is now being followed up with an unusual west to east Gulf of Mexico hurricane Milton which is heading for Tampa this week," said Louis Navellier of Navellier Calculated Investing.
"And we'll have a new President Elect in less than a month," he added. "The wall of worry appears quite steep, yet stocks remain near all-time highs, as both GDP and earnings estimates remain firmly higher."
Related: Goldman Sachs analyst overhauls S&P 500 targets for 2024 and 2025
Updated at 12:16 PM EDT
Milton update
Hurricane Milton has been upgraded to a Category 5 storm, according to the National Hurricane center in Miami, and appears to be bearing down on the Gulf coast of Florida in what could be the worst weather event to hit the city of Tampa in more than a century.
"Data from an Air Force Reserve Hurricane Hunter aircraft indicate that Milton has strengthened to a category 5 hurricane," the NHC said in its latest update. "The maximum sustained winds are estimated to be 160 mph (250 km/h) with higher gusts. Data from the aircraft also indicate that the minimum pressure has fallen to 925 mb (27.31 inches)."
On the current forecast track, Milton could make landfall near the Tampa coast early Wednesday morning before making its way across the peninsula, including a path over the city of Orlando, before heading into the Atlantic ocean.
160mph https://t.co/9nTIR3BSd7
— Jim Cantore (@JimCantore) October 7, 2024
Updated at 11:02 AM EDT
Apple grade
Apple (AAPL) shares edged lower in early trading following a rare downgrade from Jefferies analyst Edison Lee, who assumed coverage of the tech giant this week.
Lee said near-term iPhone sales forecasts might be too optimistic, given the timeframe Apple has in mind for rolling out new AI features, adding it may take two to three years for their impact to be truly felt in accelerated handset sales.
Apple shares were last marked 0.66% lower in early Monday trading to indicate an opening bell price of $225.30, a move that would trim their one-month gain to around 1.9%.
Related: Analyst unveils Apple stock rating as iPhone 16 demand issue lingers
Updated at 9:37 AM EDT
Soft open
The S&P 500 was marked 20 points, or 0.34% lower in the opening minutes of trading, while the Nasdaq slipped 67 points, or 0.37%.
The Dow fell 159 points while the mid-cap Russell 2000 slipped 10 points, or 0.46% to kick off the trading week.
"Last week was a showdown between jobs market bullishness and geopolitical bearishness," said Chris Larkin, managing director for trading and investing at E*Trade from Morgan Stanley. "This week puts the economic spotlight back on inflation, but barring any major surprises the focus will quickly shift to earnings season."
"Friday’s strong jobs report not only appeared to kill any chance of a 50-basis-point rate cut in November, it kickstarted chatter about the Fed leaving rates unchanged if economic data continues to come in hotter than expected," he added. "But as last week showed, geopolitics can’t be ignored—any escalation of the situation in the Middle East has the potential to ramp up volatility."
Updated at 9:21 AM EDT
Weighty injection
Pfizer PFE shares move firmly higher in early trading following multiple reports, first from the Wall Street Journal, that suggested activist investors at Starboard Value have built a $1 billion stake in the underperforming drugmaker.
Starboard is also reported to have tapped former Pfizer CEO Ian Read, who ended his four-decade career with the group in 2019, to help with the group's broader effort to ignite its growth prospects.
Pfizer shares were last marked 3.11% higher in premarket trading to indicate an opening bell price of $29.47 each, a move that would bump the stock's six-month gain to around 10%.
Updated at 8:06 AM EDT
Back to inversion
Benchmark 2-year Treasury note yields rose past those for 10-year notes in early trading, marking the first inversion of the yield curve since the Fed's 50-basis-point interest-rate cut on Sept. 18.
The moves reflect both new market assumptions for rate cuts, which are lifting policy-sensitive 2-year yields, as well as the improved growth prospects tied to last week's September jobs report.
Stock Market Today
Stocks ended higher on Friday, with the Dow Jones Industrial Average closing at an all-time peak, following the Labor Department's surprise September jobs report showing 254,000 new hires, the most since March, and a headline unemployment rate of 4.1%.
The report, which also showed upward revisions to the summer jobs tally alongside quickening wage gains, has added to bets that the world's biggest economy will extend its so-called no-landing momentum, with robust growth and slowing inflation, into the final months of the year.
That's shaved a notable amount of interest from the market's Federal Reserve rate-cut projections. The odds of a 0.25-percentage-point point move lower in November are now pegged at 95%, while taking Treasury yields to the highest levels since August.
Benchmark 10-year notes were last marked 3 basis points higher from Friday's close at 4.008% heading into the start of New York trading. Two-year notes are up 5 basis points to the 4% level as well.
"Looking ahead to this week, attention will be on upcoming U.S. inflation data (consumer price index) and producer prices, which will provide further clues on inflation trends and whether the Fed may shift its policy stance in the near term," Saxo Bank strategists wrote Monday.
"If inflation comes in lower than expected, it could ease pressure on bond yields and create some optimism around rate cuts," the bank added. "However, continued strong economic data could lead to further rises in bond yields as markets price in fewer rate cuts."
Global oil prices were also on the move, taking the world Brent crude benchmark closer to $80 per barrel, following another round of attacks by Israel on terrorist targets in Lebanon and the launching of missiles by Iran-backed Hezbollah into the Israeli city of Haifa.
The expanding war and the marking of the one-year anniversary of Hamas' deadly incursion into Israel, which had ended a decade-long cease-fire, are adding to concerns of a major supply disruption over the coming months.
Brent crude futures contracts for December delivery, the global pricing benchmark, were last seen $1.61 higher on the session at $76.66 per barrel. WTI futures for November delivery jumped $1.79 to $76.17 per barrel.
Related: Veteran fund manager delivers startling S&P 500 warning
Heading into the start of the trading day on Wall Street, futures contacts tied to the S&P 500, which is up around 20.5% for the year, are priced for a 38-point opening-bell decline.
Futures linked to the Dow, meanwhile, suggest a 220-point opening bell slump, while the tech-focused Nasdaq is called 153 points lower.
More Wall Street Analysts:
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- Analysts retool Carnival stock price targets ahead of earnings
- Analyst revisits Costco stock price target, rating ahead of earnings
In overseas markets, Europe's Stoxx 600 benchmark slipped 0.35% in early Frankfurt trading, with Britain's commodities-heavy FTSE 100 rising 0.2% in London.
Overnight in Asia, the yen fell to a fresh seven-week low against the U.S. dollar, helping the export-focused Nikkei 225 rise 1.8% in Tokyo. The regional MSCI ex-Japan benchmark gained 0.5% heading into the final hours of trading.
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