On Friday, U.S. stocks experienced mixed performance as concerns about conflicts in the Middle East clashed with expectations of improved earnings for major U.S. companies.
The S&P 500 declined by 21.83 points, equivalent to a 0.5% drop, closing at 4,327.78. The Dow Jones Industrial Average inched up by 39.15 points, or 0.1%, to 33,670.29, while the Nasdaq composite fell by 166.98 points, or 1.2%, ending at 13,407.23.
Notably, the oil market saw significant activity, with the price of benchmark U.S. crude surging by $4.78 to settle at $87.69 per barrel. Brent crude, the international standard, rose by $4.89 to $90.89 per barrel. Despite the Gaza region not being a major oil producer, concerns persisted that the ongoing violence could impact the political landscape of the crude market, potentially leading to disruptions in the flow of petroleum.
Apprehensions surrounding the conflict in the Middle East caused Treasury yields to decline, a typical reaction when investors seek safer assets in times of uncertainty. The yield on the 10-year Treasury decreased to 4.63% from 4.70% late on Thursday.
Yields also retreated following comments from a Federal Reserve official who suggested that the central bank may have concluded its campaign to raise its key interest rate, which commenced early last year. The Federal Reserve had raised the overnight interest rate to its highest level since 2001 from nearly zero, aiming to curb rising inflation. Elevated interest rates and longer-term bond yields can impact the prices of various investments while also slowing down the broader economy.
The ongoing situation presents economic uncertainties, including the war and oil prices, labor strikes across the country, and potential Capitol Hill dysfunction leading to another U.S. government shutdown. The Federal Reserve may opt to maintain its high interest rates in the face of these uncertainties.
A preliminary report from the University of Michigan indicated a decline in consumer sentiment in the United States, primarily due to heightened concerns about inflation. U.S. consumers are now preparing for 3.8% inflation for the coming year, up from 3.2% the previous month, marking the highest reading since May. The Federal Reserve closely monitors consumer sentiment, particularly regarding inflation expectations, and the recent increase could keep the possibility of another interest rate hike by the Fed in December or January alive.
Despite these uncertainties, Wall Street received support from strong earnings reports from JPMorgan Chase and Wells Fargo, both of which exceeded analysts' expectations for the summer quarter. JPMorgan Chase's profit for the third quarter rose by 35% compared to the previous year, benefiting from higher interest rates. However, the bank's CEO, Jamie Dimon, also expressed concerns about the current global situation.
Wells Fargo also outperformed analysts' profit expectations for the summer quarter, with bank customers continuing to borrow, even at higher interest rates.
UnitedHealth Group exceeded Wall Street's profit expectations, leading to a 2.6% increase in its stock.
Dollar General saw the most significant gain in the S&P 500, rising by 9.2%, after announcing Todd Vasos' return as CEO.
On the downside, travel-related companies faced losses, with Norwegian Cruise Line falling by 4.1% and Delta Air Lines declining by 3%.
Investment giant BlackRock saw a 1.3% decrease in its stock, despite reporting stronger profits for the latest quarter than anticipated by analysts. The uncertainty surrounding financial markets and interest rate outlook prompted clients to withdraw funds from long-term investments as they sought refuge in cash, which was offering higher yields.
In global stock markets, European indexes experienced declines, following a similar trend seen in much of Asia