Risk sentiment remains extremely delicate as the week comes to a close, with the threat of an escalation in the Middle East increasing. All major stock indices are currently trading in negative territory as of 1:00 p.m. in New York, further extending their losses for the week.
The conflicts between Israel and Hamas continue, and Israeli forces are engaged in a confrontation with Hezbollah near Lebanon’s northern border.
A meeting of global leaders is scheduled tomorrow in Cairo, Egypt, to discuss the possibility of a ceasefire. In the meantime, humanitarian aid is still awaiting clearance to enter Gaza.
Investors are turning to safe-haven assets, resulting in a rise in the prices of gold and Treasuries.
Meanwhile, Federal Reserve speakers have provided contradictory remarks. Philadelphia Fed President Patrick Harker suggested a preference for a pause, while Cleveland Fed President Loretta Mester urged alignment with the Fed’s forecasts and anticipated one more interest rate increase.
On Friday, the S&P 500 fell by 0.6%, increasing its weekly decline to 1.9%. The Nasdaq 100 performed even worse, dropping by 0.8% for the session and over 2% for the week. Blue-chip stocks limited the decline, with the Dow falling by 0.3% today and just over 1% for the week.
Amid the recent downturn, one analyst pointed out two data points that offer a glimmer of hope. Carson Group Chief Market Strategist Ryan Detrick shared two graphics indicating that the worst may be behind us.
Looking at Friday’s trading in major US equity ETFs:
– The SPDR S&P 500 ETF Trust (SPY) was down 0.6% to $424.17.
– The Invesco S&P 500 Equal Weight ETF (RSP) also fell by 0.6% to $137.97.
– The SPDR Dow Jones Industrial Average ETF (DIA) declined by 0.3% to $333.06.
– The Invesco QQQ Trust (QQQ) dropped by 0.8% to $357.15.
Sector ETFs in the S&P 500 showed mixed performance. The Energy Select Sector SPDR Fund (XLE) was the underperformer, down by 1.4%, while the Consumer Staples Select Sector SPDR Fund (XLP) rose by 0.2%.
Certain stocks reacted to earnings announcements, with Knight-Swift Transportation Holdings Inc. (KNX) surging over 9% following its quarterly results. On the other hand, SolarEdge Technologies, Inc. (SEDG) plunged over 25% after warning of a third-quarter shortfall.
In commodities and bond markets, crude oil fell by 0.6%, with a barrel of WTI-grade crude trading at $88.50. Treasury yields were lower, and the 10-year and 30-year yields dropped. Gold and silver prices increased, while the dollar slightly weakened against the euro. European equity indices were weaker, with the SPDR DJ Euro STOXX 50 ETF (FEZ) down by 0.7%.
Overall, stock volatility has reached a six-month peak, while bond yields have decreased to 18-year lows due to reactions to the Israel-Hamas conflict and comments from Federal Reserve Chair Jerome Powell.
