Wall Street indexes slip with interest rates, Middle East in focus

Reuters

Wall Street indexes slip with interest rates, Middle East in focus

Oct 7, 2024 at 7:00 pm GMT

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CBOE Volatility index hits one-month high

Pfizer gains on report Starboard Value takes $1-billion stake

Oil stocks track crude prices higher

Indexes down: Dow 0.82%, S&P 500 0.59%, Nasdaq 0.56%

Updated prices at 2:29 p.m ET/ 1829 GMT

By Sinéad Carew and Lisa Pauline Mattackal

Oct 7 (Reuters) -U.S. stock indexes fell on Monday while Treasury yields rose, as traders tamped down bets for Federal Reserve interest-rate easing.

Uncertainty around the Middle East conflict added to worries ahead of quarterly earnings season and fresh economic data.

After Friday's stronger-than-expected jobs report, traders pulled back from bets for a 50-basis-point rate cut in November. They were pricing in an 86% chance of a 25-basis-point cut and a roughly 14% chance the central bank would not cut rates at all, according to the CME's FedWatch tool.

The change in rate-cut expectations caused U.S. Treasury yields to rally, with the yield on benchmark 10-year notes US10YT=RR exceeding 4% for the first time in two months.

Besides next month's Fed meeting, investors are waiting for the Consumer Price Index inflation reading for September and the kickoff of third-quarter earnings season with reports from banks, both due this week.

"We think this is short-term nervousness that will be healed over the next five days when the CPI number is released and the bank earnings," said James Demmert, chief investment officer at Main Street Research.

Demmert noted the intensifying Middle East conflict as a concern for U.S. investors who are worried about the war's economic impact, including rising oil prices.

Investors continue to fret about how Israel would respond to Iran's missile strikes. On Monday, Lebanon's armed group Hezbollah fired rockets at Israel's city of Haifa while Israeli forces looked poised to expand ground raids into south Lebanon.

On Wall Street at 2:29 p.m. ET, the Dow Jones Industrial Average .DJI fell 347.82 points, or 0.82%, to 42,004.93, the S&P 500 .SPX fell 34.11 points, or 0.59%, to 5,717.01 and the Nasdaq Composite .IXIC fell 102.95 points, or 0.56%, to 18,035.60.

Among the S&P 500's 11 major industry indexes, only energy .SPNY advanced, rising 0.5%. U.S. crude futures CLc1 rose for the fifth-straight session on concerns about Middle East supply disruptions. O/R

The biggest industry laggard was utilities .SPLRCU, down 2.2%.

The CBOE Volatility index .VIX, Wall Street's fear gauge, hit its highest level in a month.

The S&P's biggest drag from a single stock was from Amazon.com AMZN.O, which fell almost 3% after a Wells Fargo downgrade. Amazon's decline also pressured the consumer discretionary sector .SPLRCD, which was down 1.8%.

Shares of Pfizer PFE.N rose 2.4% after a report that activist investor Starboard Value has taken a roughly $1-billion stake in the drugmaker.

Air Products and Chemicals APD.N was one of the top S&P 500 gainers, rising 8.8% on a report that activist hedge fund Mantle Ridge has built a position in the company.

Goldman Sachs raised its 2024 year-end S&P 500 .SPX target to 6,000 from 5,600, and lowered its odds of a U.S. recession to 15% from 20%.

Reporting by Sinéad Carew, Lisa Mattackal and Pranav Kashyap in Bengaluru; Editing by Shinjini Ganguli and Rod Nickel

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