US stocks slipped on Friday as the benchmark S&P 500 fell 0.4% to close at 7,716.95 points, the blue-chip Dow Jones Industrial Average declined 0.5% to settle at 53,413.60 points, and the tech-heavy NASDAQ Composite shed 0.3% to conclude at 26,506.99 points. The mixed weekly performance saw the S&P 500 rise 0.1% for the week, the Nasdaq add 0.4%, and the Dow slip 0.3%. The decline came as soaring oil prices weighed on market sentiment, with Brent crude futures climbing to $96.80 a barrel and US West Texas Intermediate crude at $92.14 a barrel. The latest exchange of fire between the United States and Iran, the biggest since July, has pushed geopolitical risks back to the centre of investors' attention after several weeks of relative calm. The Cboe Volatility Index hovered around 15 - a level that doesn't typically signal market stress, indicating relatively calm market conditions despite the recent volatility.
The market decline was prompted by a strong rebound in nonfarm payrolls report that has raised expectations for a Federal Reserve rate hike this month. US job growth surged in August and the unemployment rate held steady, according to numbers published Friday, bolstering the argument for raising rates at the Federal Reserve's Sept. 15-16 meeting. The stronger-than-expected employment data has increased the probability of a rate hike, adding pressure to the bond market where US 10-year bond yields rose to a fresh 19-month high as traders weigh the Federal Reserve's potential path for interest-rate hikes. The dollar was on shaky ground despite the ramp-up in U.S. rate hike bets as Middle East tensions raised the prospect of broader inflationary pressures that could force global central banks to tighten policy in tandem.
The strength of the artificial intelligence trade continues to help limit the impact on equities as investors appear willing to look past a degree of macroeconomic uncertainty. Dell Technologies emerged as the top S&P 500 performer, rallying 16% for its best day since May 29 after the company boosted its annual sales forecast by $25 billion due to surging demand for servers to run AI tasks. GitLab Inc. surged 10% after the software company boosted its revenue guidance for the full year, beating the average analyst estimate. The so-called Magnificent Seven stocks showed mixed performance, with Nvidia shares rising 0.33% in premarket trading, Apple gaining 0.47%, and Tesla climbing 0.47%. According to Thomas Kikis, head of markets at Standard Chartered, "When it comes to AI, we're just at the precipice. We are at the beginning of what is a very significant revolution in the way technology and data is managed."
Oil prices extended gains as Brent crude futures climbed 52 cents, or 0.54%, to $96.80 a barrel by 2354 GMT while U.S. West Texas Intermediate crude was at $92.14 a barrel, up 66 cents, or 0.72%. Oil prices rose in early trade on Wednesday, extending the previous session's surge, as concerns over supply disruption intensified after the US and Iran exchanged strikes overnight, dimming hopes for a quick easing of tensions in the Middle East. US crude prices steadied around $90 a barrel on Wednesday after a sharp advance that had triggered inflation concerns. Brent crude continues to hover around the $95 a barrel mark after topping levels of $96 earlier in the day on Wednesday. US Energy Secretary Chris Wright said that oil exports through the Strait of Hormuz crossed 17 million barrels per day on Monday, almost at par with the pre-war levels of 20 million barrels. The Revolutionary Guard Corps said the US attacks would further restrict traffic through the Strait of Hormuz, a critical waterway that carried about one-fifth of the global oil consumed before the conflict.
The recovery in equities came as the bond market remained a major source of pressure, with the US 10-year bond yields rising to a fresh 19-month high as traders weigh the Federal Reserve's potential path for interest-rate hikes. The latest escalation in the Middle East added to those concerns by putting further pressure on energy prices. US economic data offered another mixed signal, with ADP reporting that private payrolls grew by 38,000 in August, the smallest increase since the start of the year and below expectations of 47,000. The July figure was also revised down to 46,000. The August increase was the smallest since the start of the year, with the figures indicating that employers are still hiring, albeit at a slower pace than in the spring. The report precedes closely-watched jobs data from the Labor Department on Friday, with Bill Adams, chief US economist at Fifth Third Commercial Bank, noting that "The miss in ADP's numbers highlights downside risk to Friday's jobs report from the government."
