Braking operations initiated - Dow transitions focus towards Middle East and employment sector
U.S. markets witness a generally downward trend on Thursday. Some respite was provided by economic data, although it was not altogether compelling, suggesting that the U.S. economy is generally in a healthy state. The Dow Jones Industrial Average dipped 0.4% to stand at 42,012 points, while the Nasdaq remained relatively stable at 17,918, and the S&P 500 slipped 0.2% to hover around 5,700.
Investors found themselves fixated on three primary topics, as per Art Hogan, chief market strategist at B. Riley Wealth: the escalating tensions in the Middle East, the strike by U.S. port workers and its influence on inflation, and the U.S. economic forecast. "What's the pace of economic growth like," Hogan mused. This will be evident in the employment figures scheduled for release on Friday.
In the morning, the Labor Department disseminated the closely observed initial jobless claims number, which exceeded expectations but nonetheless indicated a stable labor market. With inflation seemingly in check, central bankers have turned their attention to the other aspect of their dual mandate - full employment.
Meanwhile, the Middle East turmoil also had repercussions on the oil market. The North Sea Brent and U.S. WTI crude futures each experienced over 5% increases for each 159-liter barrel. Market participants exhibited particular anxiety regarding the likelihood of Israel retaliating against the recent Iranian rocket attack by targeting Iran's energy facilities. U.S. President Joe Biden confirmed ongoing negotiations, however, declined to provide further details. There was also a concern about the U.S. potentially getting involved in the conflict.
Ashley Kelty, an analyst at Panmure Gordon, suggested that Iran could obstruct the Strait of Hormuz or wage assaults against its arch-rival Saudi Arabia's oil facilities if tensions escalated. Phil Flynn, senior analyst at the Price Futures Group, urged market participants to prepare for volatility.
The dollar continued to thrive due to its status as a "safe haven" amid Middle East tensions. The dollar index advanced 0.3% to reach its highest level in a month. In the bond market, optimistic interpretations of economic data boosted yields. The increased yields weighed on the gold price, despite gold's appeal as a safe haven. Ultimately, the gold price remained mostly unchanged.
Shares in Levi Strauss plummeted 7.7% following the jeans manufacturer's announcement of a strategic evaluation of its underperforming Dockers brand, potentially even putting it up for sale, after market hours on Wednesday. Levi also fell short of quarterly revenue targets.
Stocks in Nvidia soared 3.3% in response to news that the semiconductor company has invested in ChatGPT developer OpenAI. Shares in Hims & Hers decreased 9.6%. According to the U.S. health agency FDA, there are no more product shortages for Eli Lilly's obesity and diabetes treatments, Zepbound and Mounjaro. The telemedicine company, which markets prescription medications online, profited from these shortages by selling generic alternatives. The FDA authorizes the sale of these generics during original product shortages; however, the exemption ceases once the originals return to stock.
The focus on U.S. economic data led investors to ponder the Federal Reserve's interest rate policy, as the pace of economic growth could influence their decisions. Despite the inflation seemingly in check, central bankers are focused on achieving full employment, as indicated by the forthcoming employment figures.
Given the escalating Middle East tensions, investors might consider how changes in interest rates could impact the dollar's status as a safe haven and its role in global financial markets.
