US stock markets traded mixed on Wednesday as investors assessed fresh developments in the US jobs market and escalating attacks between the US and Iran. The Dow Jones Industrial Average rose 0.5%, gaining 265 points as of 9:58 am Eastern time, while the S&P 500 rose 0.1%. According to The Hindu BusinessLine, stocks drifted in morning trading amid the latest updates on the jobs market and further escalation in the US war with Iran. The Nasdaq Composite fell 0.1%, with technology stocks being the biggest force holding the market back. Microsoft fell 0.6% and Broadcom slipped 0.8%, as these companies with big market values tend to have more influence over the market's broader direction. Oil prices held relatively steady despite the intensification in the six-month US war with Iran, with Brent crude falling 0.5% to $94.71 per barrel. As per NDTV Profit, US stock indices opened little changed as military tensions between the US and Iran continued to heat up, with oil futures trading higher and investor anxiety increasing over the likelihood of a hike in interest rates for September by the US Federal Reserve.
US stock market indices started the trading session in the red following a renewal in military tensions between the US and Iran with regards to the Strait of Hormuz. The Dow Jones Industrial Average fell 370 points, or 0.70%, to close at 53,185.90, while the S&P 500 dropped 0.33% to 7,686.14. The Nasdaq Composite declined 0.12% to 26,370.89. According to the US military, its forces struck two Iranian launchers on Larak Island on Sunday after US forces stated that Islamic Revolutionary Guard Corps (IRGC) personnel were preparing to use rockets to deploy sea mines in the Strait of Hormuz. Iran's army on Monday claimed that it launched a drone attack on the United Arab Emirates' Al Minhad Air Base, saying that the strike targeted areas where US forces and helicopters were stationed, as retaliation. The decline was triggered by the US military's first attack on Iranian rocket launchers preparing to deploy mines into the Strait of Hormuz in over a month, marking a significant escalation in regional tensions. Oil prices jumped significantly as investors digested the geopolitical developments, adding to market uncertainty. Brent crude trading at a 0.45% uptick at ₹90.90 per barrel, while West Texas Intermediate rose 0.78% to ₹86.36 per barrel. Energy shares were the biggest gainers in the S&P 500, advancing 2.1% as US oil prices jumped 3% to briefly top $86 after the US and Iran exchanged strikes for the first time in about a month. Oil majors like Chevron Corp. and ConocoPhillips respectively rose 2.1% and 1.6% as President Donald Trump threatened Iran with more attacks.
The US 10-year yield held steady at 4.79% from late Tuesday, while the 2-year Treasury yield remained at 4.39%, as reported by The Hindu BusinessLine. Investors are betting on a 66% chance that the Fed will raise rates at its upcoming meeting in September, according to multiple reports. Swaps imply an almost 70% chance that the Fed hikes a quarter-point next month to rein in price pressures, up from 66% just before the session. Traders estimate the chances of rate hike in September at more than 50% for three major central banks, including around 70% for the Fed, according to data collected by Bloomberg. The 30-year Treasury yield rose to 5.28%, as reported by NDTV Profit, with the yields themselves increasing over anticipation of increasing inflation due to higher oil prices. The bond market has been selling off, which is a signal that it expects borrowing costs to rise. The Fed's position is growing more complicated as raising the benchmark interest rate would help cool inflation by making borrowing costs higher and slowing the economy, though it could also hurt the employment market at a time when it is seemingly already weakening. The Fed has a stated goal of cooling inflation to a target of 2%, but inflation remains well above 3% currently.
Inflation has been squeezing businesses and households at the same time that the mostly resilient jobs market shows signs of weakening, according to The Hindu BusinessLine. Payrolls processing firm ADP reported that private-sector employment slipped in August, according to its monthly survey, though this is just a small snapshot of the broader jobs market. The big focus this week will be the government's broader monthly employment report for August, which will be released Friday. The previous report for July showed that the jobs market stalled, with employers cutting positions. Both inflation and the jobs market have been key focuses for Wall Street and the Federal Reserve, with the Fed trying to balance its task of supporting employment and taming inflation. A surge in oil prices following the start of the US war with Iran fuelled a jump in gasoline prices and global shipping costs, with the conflict shutting down the Strait of Hormuz through which 20% of the world's oil is typically shipped. Higher energy costs worsened inflation that was already stubbornly high amid a volatile US tariff war with much of the world.
For the trading week of August 31 to September 4, experts have given a cautious outlook. According to Goodreturns, Nathan Peterson from Charles Schwab provided an overall "Cautious" outlook on stocks next week, noting that markets could see a "bounce back" from the Jackson Hole speech, which isn't uncommon the day after an FOMC meeting press conference. He highlighted that the Nonfarm Payrolls reports have been weak recently, and if next Friday's report is soft, this could ease rate hike concerns and translate into a bullish move for stocks. Key events include the G20 finance ministers and central bank governors meeting on Monday and Tuesday, the G20 Innovation Ministerial meeting from September 1-2 featuring keynotes from NVDA CEO Jensen Huang and OpenAI CEO Sam Altman, and the monthly jobs report on Friday. Peterson noted that stocks are also entering the month of September, which is historically the worst performing month for the S&P 500 index. Investors are revisiting some of the comments that Warsh made at Jackson Hole as well and what that may mean for interest rates, what that may mean for inflation, said Paul Nolte, senior wealth advisor & market strategist at Murphy & Sylvest in Elmhurst, Illinois. "If they do not hike rates in September, I think you will see a dramatic reaction in the markets because it's been prepped now for quite some time that they're going to raise rates." This week will bring monthly manufacturing and services sector data, as well as earnings from Nvidia Corp. rival Broadcom Inc. Other AI companies reporting this week include Dell Technologies Inc., Hewlett Packard Enterprise and Ciena Corp.
