The U.S. stock market experienced a downturn as strong economic data lifted bond yields. Contracts on the S&P 500 shed 0.6%, and Nasdaq 100 futures fell 0.8%. The yield on 10-year U.S. Treasury bonds rose back to 4%, a level not seen since August, as Friday’s blowout U.S. jobs number undercut chances of a big rate reduction in November.
We have to be a bit careful in terms of drivers, as we will probably not get a lot of big aggressive rate cuts,” Marija Veitmane, head of equity strategy at State Street Global Markets, said on Bloomberg TV. Europe’s Stoxx 600 index edged 0.3% lower after German factory orders dropped the most since January. Investors are also concerned about Israel’s potential response to Iran’s recent missile attack, with Brent crude futures pushing above $79 a barrel.
Despite the downturn, the Dow Jones Industrial Average rose 341.16 points, or 0.8%, closing at a record high of 42,352.75 on Friday. The S&P 500 climbed 51.13 points, or 0.9%, finishing at 5,751.07. The Nasdaq Composite rallied 219.37 points, or 1.2%, ending at 18,137.85.
For the week, the S&P 500 advanced 0.2%, while both the Dow and Nasdaq edged up 0.1%. Yields on 2- and 10-year government debt finished Friday with their largest weekly advances in up to two years. The 2-year rate jumped 36.7 basis points to 3.929%, the biggest weekly rise since June 2022.
The 10-year yield rose 22.9 basis points to 3.980%, the largest weekly climb since October 2023.
Stocks dip as bond yields climb
Oil prices surged amid tensions between Israel and Iran, raising worries of a wider conflict in the Middle East.
November West Texas Intermediate crude rose 67 cents, or 0.9%, settling at $74.38 a barrel on the New York Mercantile Exchange. Brent crude for December delivery added 43 cents, or 0.6%, ending at $78.05 on ICE Futures Europe. Both posted weekly gains of 9.1%, the largest since October 2022.
President Joe Biden suggested that Israel should consider alternatives to striking Iran’s oil fields in retaliation for a missile barrage earlier this week. Oil prices had surged to session highs on Thursday following Biden’s comments but trimmed gains after his Friday remarks. Big Tech stocks were mostly up Friday afternoon, led by Tesla Inc., which saw a 3.6% increase in its stock price.
The Roundhill Magnificent Seven ETF, which holds seven prominent Big Tech stocks, was up 1.1%. Gold futures experienced a drop due to the strength in the U.S. dollar following the jobs report. Gold for December delivery fell $11.40, or 0.4%, settling at $2,667.80 an ounce on Comex.
The upcoming jobs report is crucial for understanding the state of the U.S. labor market. Analysts suggest that good job numbers might indicate the economy is avoiding recession, despite ongoing geopolitical issues and rising oil prices. Conversely, lower-than-expected job numbers might prompt the Federal Reserve to consider further rate cuts.
