S&P 500 and Nasdaq Close Lower on Deteriorating Consumer Sentiment and Middle East Conflict
October 13, 2023
On Friday, the S&P 500 and the Nasdaq closed lower as deteriorating consumer sentiment data and the Middle East conflict negatively impacted investor sentiment. Despite upbeat quarterly earnings from some of the largest U.S. banks, riskier bets were overshadowed by these concerns.
At the opening of the trading session, Wall Street’s three major indexes showed gains but later lost ground when a preliminary reading on U.S. consumer sentiment revealed a sharp fall in October. The Dow Jones Industrial Average managed to eke out a small gain.
Investors were also keeping a close eye on developments in the Middle East. On Friday, Israel announced ground operations inside the Gaza Strip, responding to Hamas fighters’ deadly rampage in Israel. The United Nations expressed concerns about the devastating humanitarian consequences that could arise from Israel’s call for Gaza civilians to evacuate.
In response to the uncertain situation, U.S. Treasury prices rose as investors sought safety, while U.S. crude oil prices spiked by 5.8%.
“This signals more of a risk-off sentiment,” said Lauren Goodwin, economist and portfolio strategist at New York Life Investments. The movements in bonds, equities, and oil reflect concerns about deteriorating consumer sentiment, the global economy, and geopolitical conflicts, she added.
Goodwin pointed out that at this stage of the economic cycle, when data is expected to worsen in the coming months, shifts in market leadership are common and no single market narrative tends to last for long. However, she did not anticipate Friday’s mood to indicate the beginning of a troubled market unless there is a major escalation in the Middle East conflict.
The Dow Jones Industrial Average rose 39.15 points, or 0.12%, to close at 33,670.29. The S&P 500 lost 21.83 points, or 0.50%, ending at 4,327.78. The Nasdaq Composite dropped 166.99 points, or 1.23%, to finish at 13,407.23.
Despite Friday’s decline, the S&P 500 registered a 0.45% gain for the week, marking its second consecutive weekly advance. Meanwhile, the Nasdaq fell 0.18% for the week, and the Dow showed a 0.79% gain, breaking a two-week losing streak.
Among the S&P’s major industry sectors, energy led the gains with a 2.3% advance due to rising oil prices. Defensive sectors such as utilities, up 1%, and consumer staples, adding 0.8%, were also among the top performers. Safe-haven assets like gold also rallied.
Quarterly profits from JPMorgan Chase, Wells Fargo, and Citigroup exceeded analysts’ estimates, leading to stock gains for JPMorgan (up 1.5%) and Wells Fargo (up 3%). However, Citigroup ended slightly lower with a 0.2% loss. After initially rising to a three-week high, the S&P 500 Banks index closed up 0.6%.
Federal Reserve Bank of Philadelphia President Patrick Harker stated that he believes the central bank is likely done with its rate-hiking cycle as price pressures have eased.
In terms of individual stocks, asset manager BlackRock saw a 1.3% drop in its quarterly net inflows, resulting in a 1.3% decline in its stock price. UnitedHealth, on the other hand, advanced 2.6% after beating third-quarter profit estimates. Dollar General finished the day with a 9% gain following the appointment of former CEO Todd Vasos to replace Chief Executive Jeff Owen. Boeing closed down 3% after the planemaker and Spirit AeroSystems expanded the scope of their ongoing inspections of a production defect affecting 737 Max 8 aircraft. Spirit’s shares lost 0.9%.
Declining issues outnumbered advancers on the NYSE by a ratio of 1.56-to-1, and on Nasdaq, decliners outweighed advancers with a ratio of 1.68-to-1.
Throughout the session, the S&P 500 recorded 12 new 52-week highs and 20 new lows, while the Nasdaq Composite registered 28 new highs and 335 new lows. A total of 10.06 billion shares were traded on U.S. exchanges, slightly below the 10.37 billion average for the past 20 sessions.
Reporting by Sinéad Carew, Shashwat Chauhan, and Ankika Biswas in Bengaluru; Editing by Shounak Dasgupta, Anil D’Silva, Shinjini Ganguli, and Richard Chang