U.S. stock markets experienced a significant downturn on Thursday, with major indices closing sharply lower. The Dow Jones Industrial Average fell below the 47,000-point mark, hitting a new low for the year, while the S&P 500 index declined for the third consecutive session. Rising oil prices intensified concerns about inflation and rapidly diminished hopes for interest rate cuts by the Federal Reserve.
In the U.S. market, the Dow dropped by 739.42 points, or 1.56%, to close at 46,677.85. The Nasdaq Composite fell by 404.16 points, or 1.78%, to 22,311.98. The S&P 500 decreased by 103.22 points, or 1.52%, settling at 6,672.58. Occidental Petroleum (OXY) gained 5%, while Taiwan Semiconductor Manufacturing (TSM) and Intel (INTC) both fell over 5%. NVIDIA (NVDA) declined more than 1%, and Apple (AAPL) dropped nearly 2%. The Nasdaq Golden Dragon China Index closed 1% lower, with XPeng (XPEV) rising 3.5% and Alibaba (BABA) falling over 1%.
In European markets, Germany's DAX 30 index edged up 5.67 points, or 0.02%, to 23,593.45. Britain's FTSE 100 index fell 45.17 points, or 0.44%, to 10,308.60. France's CAC 40 index dropped 57.37 points, or 0.71%, to 7,984.44. The Euro Stoxx 50 index decreased by 43.02 points, or 0.74%, to 5,751.66. Spain's IBEX 35 index fell 208.09 points, or 1.20%, to 17,143.81. Italy's FTSE MIB index declined by 285.46 points, or 0.64%, to 44,487.50.
In Asian markets, Japan's Nikkei 225 index fell 1.04%, South Korea's KOSPI index dropped 0.48%, and Indonesia's Jakarta Composite Index decreased 0.37%.
Cryptocurrencies showed little movement, with Bitcoin trading at $70,239.4 and Ethereum at $2,064.75.
Oil prices continued their ascent. NYMEX April WTI crude futures rose by $8.48 to settle at $95.73 per barrel, a gain of 9.72%. ICE May Brent crude futures increased by $8.48 to close at $100.46 per barrel, up 9.22%. This marked the first time Brent crude settled above $100 per barrel since August 2022, driven by disruptions in the Persian Gulf that have trapped millions of barrels of oil, creating one of the largest market disturbances in history. The global benchmark surged over 9% as attacks on vessels in the Arabian Gulf led investors to believe that Iran's maritime disruptions could extend beyond the critical Strait of Hormuz. A post on Truth Social stating that Iran not having nuclear weapons was "far more important to me than rising oil prices" suggested the conflict might persist.
The U.S. Dollar Index, which measures the dollar against a basket of six major currencies, rose 0.52% to 99.746. By the close in New York, one euro traded at $1.1521, down from $1.1569 the previous day. One pound sterling was worth $1.3356, down from $1.3407. The dollar bought 159.31 Japanese yen, up from 158.89, and 0.7845 Swiss francs, up from 0.7799. It also traded at 1.3626 Canadian dollars, up from 1.3587, and 9.3433 Swedish kronor, up from 9.2301.
Precious metals declined, with spot gold settling at $5,079.92 and spot silver at $83.834.
On the macroeconomic front, U.S. initial jobless claims saw a slight decrease, indicating a moderate level of layoffs. For the week ended March 7, initial claims were 213,000, lower than the previous week's 214,000 and below market expectations of 215,000. Continuing claims for the week ended February 28 fell to 1.85 million from 1.87 million. This data followed a weaker-than-expected employment report showing a loss of 92,000 jobs in the previous month, contrasting with a gain of 126,000 in January. The modest claims figures suggest businesses are retaining employees rather than implementing large-scale layoffs.
U.S. housing starts rose to their highest level in nearly a year, marking a third consecutive month of growth, primarily driven by multi-family housing projects. January housing starts increased 7.2% to an annual rate of 1.49 million units, exceeding market forecasts. A nearly 30% surge in multi-family construction offset a decline in single-family starts. The report indicates some momentum in the housing market early in the year, with lower mortgage rates and builder incentives attracting potential buyers. This is gradually reducing builder backlogs and encouraging more construction activity, though builder sentiment remains subdued due to affordability concerns and high construction costs. Recent data showed U.S. mortgage rates recorded their largest weekly increase since last September following market disruptions related to the Iran conflict.
The U.S. trade deficit narrowed significantly in January as exports grew, following a volatile year for importers dealing with fluctuating tariff policies. The goods and services trade deficit shrank by over 25% from the previous month to $54.5 billion, well below the median market forecast of a $66 billion deficit. Exports rose 5.5% month-over-month, driven by increases in non-monetary gold, other precious metals, computers, and aircraft. Overall imports fell 0.7%, reflecting a decrease in pharmaceutical imports. Trade flows experienced considerable volatility last year as importers reacted to a series of tariff announcements. Tariff rates were unchanged in January, but subsequent court rulings in February led to the re-imposition of tariffs through other legal authorities.
The administration is reportedly planning a temporary waiver of the century-old Jones Act as part of efforts to curb soaring oil prices. A 30-day waiver would allow foreign tankers to help transport fuel from the Gulf Coast and other U.S. regions to East Coast refineries. This move is being considered among various options to address sharp increases in crude and gasoline prices resulting from the Iran conflict.
Federal Reserve Governor Michelle Bowman stated that proposed revisions to a comprehensive bank capital rule would result in a slight decrease in capital requirements for large banks, a significant victory for Wall Street firms that had resisted earlier drafts calling for increases. Bowman outlined adjustments to Basel rules and the GSIB surcharge, which determine how much capital banks must hold against potential losses. She described the changes as a "calibrated" approach that would make capital requirements more aligned with actual bank risks and remove overlapping standards, suggesting a deviation from recent trends of increasing capital buffers.
Bond traders have scaled back expectations for Federal Reserve rate cuts this year. Interest rate swaps linked to Fed meeting dates priced in only 24 basis points of cuts for the year by Thursday, less than a full 25-basis-point cut and down from about 30 basis points expected Wednesday evening. This shift occurred alongside a continued sell-off in U.S. Treasuries, with the yield on the policy-sensitive 2-year note rising 4 basis points to near 3.70%. Pressure on bonds this week stems from investor concerns that Middle East conflict will keep energy prices elevated, potentially rekindling inflation.
According to analysts, emergency releases from strategic petroleum reserves to offset supply disruptions from the Strait of Hormuz could take weeks to be loaded onto tankers, with even longer transit times to final destinations. Energy Aspects analysts noted that most countries require about two weeks to release reserves. The U.S. Strategic Petroleum Reserve, stored in Gulf Coast salt caverns, can enter the market within 13 days of a presidential decision. However, shipping to Asia takes about 45 days, meaning any U.S. reserve exports would not reach Asian destinations until mid-May at the earliest. Several countries, including the U.S. and Japan, have committed to releasing approximately 400 million barrels from reserves. The speed of release is critical, as it is impossible to release all oil at once. The maximum daily release rate in previous efforts was 1.3 million barrels, less than one-tenth of the current supply disruption.
CME Group has warned of "catastrophic consequences" if the U.S. government intervenes in oil futures markets to lower prices during the Iran conflict. CME CEO Terry Duffy stated that government intervention in futures markets to curb price increases would undermine market confidence. He emphasized that "markets dislike government intervention in pricing," and such actions could lead to an "epic disaster" by causing investors to lose faith in the market's price-setting function for key commodities. Reports indicated the Treasury Department was considering measures to lower oil prices, including intervening in futures markets.
In corporate news, Adobe announced the resignation of its CEO Shantanu Narayen, amid market skepticism about the company's ability to thrive in the AI era. The company also issued a current-quarter sales forecast slightly above expectations but failed to alleviate concerns that the software maker is falling behind new competitors. For the quarter ending in May, Adobe projected revenue between $6.43 billion and $6.48 billion, compared to an average analyst estimate of $6.43 billion. Adjusted earnings per share are expected to be between $5.80 and $5.85, above the average estimate of $5.70. The company's stock fell over 7% in after-hours trading.
Amazon seized the opportunity to issue $54 billion in global bonds this week. Banks marketing the debt emphasized Amazon as a reliable choice in an increasingly unpredictable world amid the Iran conflict. Investors appeared receptive. The company borrowed $37 billion in the U.S. on Tuesday across 11 tranches, attracting approximately $126 billion in orders from fund managers, nearing a record. On Wednesday, it raised €14.5 billion in its euro bond market debut, the largest corporate bond issuance in the eurozone's history.
S&P Dow Jones Indices is considering rule changes that could accelerate SpaceX's entry into the S&P 500 index following a potential initial public offering. Such a change could trigger billions in passive fund inflows for the space transportation and satellite company led by Tesla CEO Elon Musk. Funds tracking the index must purchase newly added stocks, with approximately $24 trillion in assets linked to the S&P 500. The index provider is reportedly engaging with relevant parties to determine if rule modifications are necessary, though no decision has been made, and a formal consultation process would be required before any changes are implemented.
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