Dow Jones falls 200 points in volatile session ahead of non-farm payrolls data
US markets ended lower on Thursday after a volatile trading session as sentiment remains sour amidst rising tensions in the middle east and ahead of September’s non-farm payrolls data which will be reported later this evening.
The Dow Jones fell nearly 200 points to end right at the mark of 42,000. The S&P 500 fell 0.2%, while the Nasdaq ended just below the flat line. Downside pressure on the two latter indices was capped due to a 3% surge in shares of Nvidia.
The bigger story though, comes from oil prices, with US crude futures surging 5% overnight after US President Joe Biden said that the US is mulling whether to support Israel’s potential strikes on Iran’s oil facilities.
A report from Citigroup had highlighted that a major attack by Israel on Iran’s oil facilities could take 1.5 million barrels per day off the market, while an attack on minor facilities could lead to a loss of 3,00,000 to 4,50,000 barrels per day.
The S&P 500 Energy Sector, in response, is up nearly 6% for the week and is set for its best week in nearly a year.
However, the benchmark indices are set for losses this week with the Dow and the S&P 500 down 0.7% so far, while the Nasdaq is down over a percent.
The drop comes after the best nine months that the benchmark indices on Wall Street have had since 1997.
Weekly jobless claims on Thursday came in slightly higher than expected, while the ISM Services PMI stood at 54.9, bettering estimates. A reading above 50 indicates expansion.
“The VIX is signaling that we are still in the midst of the ‘iffy October’ period,” Fundstrat’s Thomas Lee said. But, he added, with multiple historical factors in the S&P 500’s favor, “we ultimately expect investors to buy this dip.”
To Michael Metcalfe, head of macro strategy at State Street Global Markets, international conflict has returned as a driver for markets. “There might be a pressure to rebalance, because markets are stretched and I don’t see that as being particularly positive for US equities,” he said.
All eyes are now on the non-farm payrolls data scheduled to be reported on Friday evening Indian time. The unemployment rate is forecast to hold steady at 4.2% in September while payrolls are expected to rise by 150,000.
“I am of course nervous heading into tomorrow’s jobs report,” Kallum Pickering, chief economist at Peel Hunt, said on Bloomberg Television. “If the unemployment rate ticks up, I wouldn’t be surprised that markets would shift back toward expecting 50 basis points and then it is a question of how the Fed may react.”
Bloomberg’s dollar index gained for a fourth day, bolstered by the rise in Treasury yields. The British pound is on pace for its worst day since 2022 after a Bank of England official suggested the central bank could take a more aggressive approach to lowering interest rates.
(With Inputs From Agencies.)