Bonds, Oil Surge as Iran Fires Missiles at Israel: Markets Wrap

(Bloomberg) — Bonds and gold climbed while stocks dropped as investors retreated to safer corners of the market after Iran fired missiles at Israel following “targeted ground raids” initiated in Lebanon.

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An earlier report that the US is actively supporting preparations to defend Israel against the attack spurred gains across haven assets. Gold climbed to near $2,670 an ounce while a gauge of the dollar strengthened and oil prices spiked..

Tech stocks were the worst performers with Apple Inc. and Nvidia Corp. sinking more than 3% as the Nasdaq 100 lost 1.9% and the S&P 500 fell 1%.

Economic data sent mixed signals. The US ISM price index fell by the most since May 2023, while US job openings rose in August to a three-month high, at odds with other data indicating slowing demand for workers. Treasury yields were lower across the board with the 10-year hovering around 3.71%.

“Today’s reports should weigh down the 10-year yield, dollar, and employment service stocks, though the payroll release is more influential,” according to Evercore ISI’s Stan Shipley, alluding to Friday’s highly anticipated employment readout. “However, geopolitical stories out of the Mideast are more important for Treasury markets.”

Traders are also watching striking longshoremen, the longer traffic at major US container ports is shuttered, the bigger the economic losses. JPMorgan Chase & Co. estimates the stoppage will cost between $3.8 billion to $4.5 billion a day.

Wall Street’s fear gauge — the VIX — spiked higher, testing a key level that usually indicates more volatility ahead.

Tuesday kicks off a historically positive, though often volatile, period for equities. The S&P 500 set its 43rd closing record on Monday notching a third-quarter rally that capped the longest such winning stretch since 2021.

“October has been a much friendlier month to bulls from start to finish, but in between it hasn’t been a walk in the park,” according to Bespoke Investment Group strategists. It’s average intramonth peak-to-trough decline of around 4.6% is the largest of any month, according to Bespoke data going back to 1945.

To Michael Kantrowitz, chief investment strategist at Piper Sandler & Co., stocks are reflecting “an immaculate economic outlook.”

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“The issue I see for any meaningful upside move for equities here is that there is essentially no risk priced into equities,” he said. “If rockets fly, markets will react even more.”

Money markets imply a one-in-three chance the Fed will deliver another half-point cut in November, but that may not pan out as expected, Larry Fink warned.

“The amount of easing that’s in the forward curve is crazy,” Fink, the chief executive officer of BlackRock Inc. said in an interview with Bloomberg Television. “There’s room for easing more, but not as much as the forward curve would indicate.”

Euro-area inflation slowed below the European Central Bank’s 2% target for the first time since 2021, prompting money markets to add to bets on another quarter-point decrease by the ECB this month. Earlier, ECB President Christine Lagarde said the bank is becoming more optimistic about getting price pressures under control.

Key events this week:

• South Korea CPI, S&P Global Manufacturing PMI on Wednesday

• Fed speakers include Richmond’s Thomas Barkin, Cleveland’s Beth Hammack, St. Louis’s Alberto Musalem and Fed Governor Michelle Bowman on Wednesday

• US nonfarm payrolls, Friday

Some of the main moves in markets:

Stocks

• The S&P 500 fell 1.2% as of 1:10 p.m. New York time

• The Nasdaq 100 fell 1.9%

• The Dow Jones Industrial Average fell 0.6%

• The MSCI World Index fell 1%

Currencies

• The Bloomberg Dollar Spot Index rose 0.4%

• The euro fell 0.7% to $1.1053

• The British pound fell 0.9% to $1.3250

• The Japanese yen was little changed at 143.51 per dollar

Cryptocurrencies

• Bitcoin fell 2.7% to $62,080.02

• Ether fell 4.6% to $2,493.38

Bonds

• The yield on 10-year Treasuries declined seven basis points to 3.71%

• Germany’s 10-year yield declined nine basis points to 2.04%

• Britain’s 10-year yield declined six basis points to 3.94%

Commodities

• West Texas Intermediate crude rose 5.1% to $71.65 a barrel

• Spot gold rose 1.3% to $2,667.84 an ounce

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Alexandra Semenova, Allegra Catelli, Alice Atkins, Cecile Gutscher and Margaryta Kirakosian.

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