Wall Street ran out of late comebacks Tuesday, sinking in a tech-led sell-off after Iran's missile attack on Israel and a strike by U.S. port workers.
Wall Street's complex dance today saw shares related to military spending and energy climb amid mounting Middle East tensions, while stocks tied to shipping activity and retailing lost ground as ports shut down on the East Coast. Potential long-term impacts of the strike include goods inflation and supply chain snafus. Retailers, railroads, auto companies, and industries that rely heavily on imports from Europe may have the most to worry about.
The U.S. dollar, gold, and Treasuries found traction in what appeared to be a flight toward perceived "safety" after Iran's attack, which occurred midday U.S. time. Initial reports suggest damage was limited, but possible retaliation by Israel could keep markets on edge. WTI Crude Oil futures (/CL) initially climbed 5% on the news, but gains diminished toward the end of the session.
Major indexes attempted a rebound from their lows, reminiscent of Monday's late recovery, but this time, buyers didn't seem as enthused. Still, the deep midday sell-off eased toward the end of the session even as volatility hit nearly one-month highs.
The benchmark U.S. 10-year Treasury note's (TNX) early strength narrowed the yield curve, or the premium of longer-term to shorter-term yields, which had been widening since the Federal Reserve's rate cut last month. The 10-year yield, which moves the opposite direction of underlying notes, managed to claw back from intraday lows but still finished well below Monday's levels following the "flight to safety" and weak U.S. manufacturing data.
Here's where the major benchmarks ended:
• The S&P 500® index (SPX) fell 53.73 points (–0.93%) to 5,708.75; the Dow Jones Industrial Average® ($DJI) declined 173.18 points (–0.41%) to 42,156.97; the Nasdaq Composite® ($COMP) lost 278.81 points (–1.53%) to 17,910.36.
• The 10-year Treasury note yield (TNX) fell six basis points to 3.74%.
• The Cboe Volatility Index® (VIX) jumped to 19.28, the highest in nearly a month.
Stocks on the move
The port strike is inconvenient timing if you're a retail firm building up stock for holiday shopping, though these strikes typically haven't lasted long in the past. The fourth quarter is when many retail firms make most of their profits, and that could be why Best Buy (BBY), Target (TGT), and other names in that sector struggled today.
There's one school of thought suggesting air freight providers like FedEx (FDX) and UPS (UPS) could benefit if the strike lasts awhile. Railroad stocks, on the other hand, could suffer. They handle a lot of containers from affected ports, Barron's noted.
Semiconductors had a rough session, possibly in sympathy with a 3% decline for market-leader Nvidia (NVDA). However, there wasn't much sector-specific news.
Overall, declining shares led advancing ones today, with energy climbing most thanks to rising crude prices. Info tech fell sharply, perhaps a sign of "risk-off" sentiment taking hold in the wake of the Middle East conflict and port strike. If rising volatility related to geopolitical rumblings persists, that could conceivably sap risk appetite in coming days, especially with the keystone nonfarm payrolls report due Friday and the U.S. election looming.
The following companies had stock price moves driven by analyst ratings, quarterly earnings, or other news:
• CVS (CVS) dropped 2.13% after The Wall Street Journal reported the struggling healthcare company is undergoing a "strategic review" of its options, including a possible breakup.
• McCormick (MKC) added 2.17% after what analysts called strong third-quarter results and raised guidance.
• Apple (AAPL) plunged 2.91% after Barclays (BCS) released a research note today suggesting slower iPhone 16 demand based on the analyst's supply chain channel checks.
• Lockheed Martin (LMT) rose 3.64% as the defense company and some of its competitors were underpinned by saber rattling and military activity in the Middle East.
Tesla's (TLSA) quarterly delivery figures are due Wednesday, and analysts expect around 460,000, up 6% from a year earlier. Earlier today, General Motors (GM) reported a 3% annual third-quarter U.S. retail sales gain but a 2% drop in deliveries, suggesting higher prices along with a possible shift toward higher-end models might have helped revenue. Toyota (TM) saw a much weaker volume trend, down more than 20% in September.
Shares of footwear giant Nike (NKE) fell 1.5% in post-market trading as investors digested quarterly results, which saw Nike beat analysts' average earnings per share estimate and matched consensus on revenue. North American sales stayed soft. Shares are much lower for the year but up sharply over the last week since Nike announced the hiring of company veteran Elliott Hill as CEO, a transition taking place in mid-October.
More consumer-oriented earnings reports round out the week with food processor Conagra (CAG) on Wednesday and spirits company Constellation (STZ) Thursday.
Manufacturing stays subdued
September's ISM Manufacturing PMI® continued the report's contractionary ways with a headline reading of 47.2%, below consensus of 47.4% but up from 46.8% in July and below the contraction/expansion line of 50 for the sixth straight month. On a positive note, the reading on prices fell below 50 for the first time this year and suggested easing inflation pressure. Also, the market didn't seem too fazed by the data as it was last time out.
The ISM Services PMI® has been far stronger than manufacturing, and that's due Thursday. Analysts expect 51.6%, a slight improvement from August.
In other data out today, the Atlanta Fed's GDPNow forecast for the third-quarter projected gross domestic product (GDP) growth to be 2.5%, down from the 3.1% previous estimate. This reflects this morning's construction spending and manufacturing data. Construction spending fell 0.1% in August from July, well below the 0.3% consensus.
A busy week for employment data began today as the August Job Openings and Labor Turnover Survey (JOLTS) topped expectations and up more than 300,000 from July at 8.04 million. Analysts had expected JOLTS to show 7.67 million job openings, according to Trading Economics. The quit rate, however, fell to 3.08 million, the lowest in four years. Falling quits could suggest a tighter jobs market where fewer people are willing to risk leaving their old positions.
"Today's data further confirms the labor market is weakening," said Cooper Howard, director, fixed income strategy, at the Schwab Center for Financial Research. "The number of openings rose, but the quits rate fell to 1.9%. The ratio of openings to unemployed ticked slightly higher to 1.1."
This means there's roughly one job available for every unemployed worker, down from 2-to-1 at times shortly after the pandemic. When fewer jobs are available companies may come under reduced pressure to raise wages. This isn't welcomed by workers, but could help companies protect their margins.
The ADP employment report is due early Wednesday, but it doesn't often correlate with Friday's official U.S. government nonfarm payrolls report. Analysts anticipate September payrolls to grow around 140,000, Trading Economics said, down from 142,000 in August. Unemployment is seen static at 4.2%.
Average job growth has been low at 116,000 over the last three months. A poor September showing might reinforce market perception that the Fed needs to sharpen its knife. Atlanta Fed President Raphael Bostic said today that steeper cuts might be required if jobs data disappoint. "A surprise to the weak side .... would pull me much further into really needing another dramatic move," Bostic told Reuters.
Stay tuned early Thursday for the September Challenger Job Cuts report, which hit a five-month high of 75,891 in August. That was also the most for August since 2009, and the Fed closely follows layoff trends.
One day after Fed Chairman Jerome Powell said the Fed isn't on a "preset course" for rate cuts and hinted that just 50 basis points of further easing might be ahead this year, the market continues to embrace that thinking.
Late today, futures traders build in a 61% chance rates will fall 25 basis points at the Federal Open Market Committee (FOMC) meeting on November 6–7, based on the CME FedWatch Tool. There's a 39% chance of a 50-basis-point cut.
