Global Markets Weekly Wrap KW 40 : U.S. Stocks Rise Despite Middle East Tensions and Labor Strike Fears
U.S. stocks ended the week with gains despite growing tensions in the Middle East and a labor strike at key Eastern seaports. Although concerns over potential conflict in the Middle East initially weighed on investor sentiment, the energy sector benefited from the surge in oil prices, which reached a one-month high. However, industries like cruise lines and consumer discretionary stocks faced pressure, with Nike experiencing a significant drop after it withdrew its full-year sales forecast.
Early in the week, news reports that Iran was preparing a missile attack against Israel triggered market volatility. On Tuesday, Iran launched nearly 200 missiles at Israel, with several reaching southern and central parts of the country. This caused the S&P 500 to fall by 1.38%, though markets stabilized the next day when worst-case scenarios did not materialize.
Meanwhile, labor unrest in the U.S. added complexity to the economic landscape. The International Longshoremen's Association's strike, which closed down operations at major East Coast and Gulf ports, sparked concerns over potential disruptions to supply chains and inflationary pressures. However, a temporary agreement reached by Thursday alleviated fears, delaying the strike until mid-January.
Despite these concerns, Friday brought more positive news in the form of the U.S. jobs report. The Labor Department revealed that the U.S. added 254,000 jobs in September, surpassing estimates and marking the strongest job growth since March. August's numbers were also revised upward, and the unemployment rate fell to 4.1%. While this report initially boosted stocks, investors grew wary as wage growth accelerated, with average hourly earnings rising by 0.4% in September and 0.5% in August—the highest increase so far this year. These numbers raised inflation concerns, which led to mixed market reactions.
The manufacturing sector saw continued decline, as factory jobs shrank for the fifth time in 2024. However, the services sector showed strong growth, with the Institute for Supply Management's index rising to 54.9, the highest in 19 months. Nonetheless, price pressures in services also grew, which may add to inflation worries going forward.
In the bond market, U.S. Treasury yields jumped after the jobs report, with the 10-year note reaching 3.98%, its highest since August. Municipal bonds outperformed Treasuries despite a packed primary calendar, and demand remained strong for investment-grade corporate bonds. However, the high-yield bond market experienced some pressure due to the geopolitical tensions in the Middle East.
The Dow Jones Industrial Average (DJIA), S&P 500, and Nasdaq Composite all ended the week higher, with gains of 39.75 points, 12.90 points, and 18.26 points, respectively. However, mid-cap and small-cap stocks, represented by the S&P MidCap 400 and Russell 2000, saw slight declines.
Internationally, European stocks experienced declines amid concerns over the Middle East and weak economic data. The pan-European STOXX Europe 600 Index fell 1.80%, with major losses in Italy, France, and Germany. In contrast, Chinese stocks surged as investors grew optimistic about Beijing's economic stimulus measures, despite continued weak manufacturing data.
Major economic events in the US include: Initial Jobless Claims; CPI MoM; Umich Sentiment; PPI Final Demand; MBA Mortgage Applications; Trade Balance
Early in the week, news reports that Iran was preparing a missile attack against Israel triggered market volatility. On Tuesday, Iran launched nearly 200 missiles at Israel, with several reaching southern and central parts of the country. This caused the S&P 500 to fall by 1.38%, though markets stabilized the next day when worst-case scenarios did not materialize.
Meanwhile, labor unrest in the U.S. added complexity to the economic landscape. The International Longshoremen's Association's strike, which closed down operations at major East Coast and Gulf ports, sparked concerns over potential disruptions to supply chains and inflationary pressures. However, a temporary agreement reached by Thursday alleviated fears, delaying the strike until mid-January.
Despite these concerns, Friday brought more positive news in the form of the U.S. jobs report. The Labor Department revealed that the U.S. added 254,000 jobs in September, surpassing estimates and marking the strongest job growth since March. August's numbers were also revised upward, and the unemployment rate fell to 4.1%. While this report initially boosted stocks, investors grew wary as wage growth accelerated, with average hourly earnings rising by 0.4% in September and 0.5% in August—the highest increase so far this year. These numbers raised inflation concerns, which led to mixed market reactions.
The manufacturing sector saw continued decline, as factory jobs shrank for the fifth time in 2024. However, the services sector showed strong growth, with the Institute for Supply Management's index rising to 54.9, the highest in 19 months. Nonetheless, price pressures in services also grew, which may add to inflation worries going forward.
In the bond market, U.S. Treasury yields jumped after the jobs report, with the 10-year note reaching 3.98%, its highest since August. Municipal bonds outperformed Treasuries despite a packed primary calendar, and demand remained strong for investment-grade corporate bonds. However, the high-yield bond market experienced some pressure due to the geopolitical tensions in the Middle East.
The Dow Jones Industrial Average (DJIA), S&P 500, and Nasdaq Composite all ended the week higher, with gains of 39.75 points, 12.90 points, and 18.26 points, respectively. However, mid-cap and small-cap stocks, represented by the S&P MidCap 400 and Russell 2000, saw slight declines.
Internationally, European stocks experienced declines amid concerns over the Middle East and weak economic data. The pan-European STOXX Europe 600 Index fell 1.80%, with major losses in Italy, France, and Germany. In contrast, Chinese stocks surged as investors grew optimistic about Beijing's economic stimulus measures, despite continued weak manufacturing data.
Looking ahead, markets will continue to monitor U.S. economic indicators, as well as geopolitical developments, to gauge the potential impact on both global growth and inflation.
Checklist for the next weekMajor economic events in the US include: Initial Jobless Claims; CPI MoM; Umich Sentiment; PPI Final Demand; MBA Mortgage Applications; Trade Balance
Major economic events around the world include: Germany Industrial Production; Australia Westpac Consumer Conf; Tawain CPI; Germany CPI; Netherlands CPI