US Market: Bears toppled Wall Street on October 7, as investors nervously betted on upcoming Fed rate cuts with the tensions in the Middle East in a frenzy. The latest report suggests that Iran might be testing its Nuclear sights as a loud explosion-like earthquake was felt and heard. At the same time, Israel continues to pound into the regions of Hamas and Hezbollah in Gaza and Lebanon. Dow Jones, S&P 500 and Nasdaq Composite Index dipped over 1% each.
Iran Testing Nuclear Bomb?
The Islamic Republic of Iran reportedly witnessed a 4.5-magnitude seismic event, near the country's Semnan province. The tremors were felt on October 5. However, the event raised speculations and questions on whether Iran is testing its nuclear weapons. This is because reports have stated that the earthquake was 10 kilometres beneath the surface but closer to one of the nuclear facilities.
Meanwhile, Iran's proxy Hamas has reportedly sent a couple of rockets from Gaza to cities of Israel such as Tel Aviv, Kfar and others on Monday, ironically on the 1-year of the October 7 massacre. More than 100 hostages are still most likely held in Gaza.
Amidst tackling down the majority of Hamas terrorists, Israel is currently rampaging in Lebanon, especially Beirut, the heart of Hezbollah headquarters.
The geopolitical tensions in the Middle East raise many concerns related to supply-chain disruption, which could impact inflation and the global economy.
US Market Reaction On October 7:
Dow Jones: The Dow Jones Industrial Average or DJIA index traded down by 398.51 points or 0.94% to 41,954.24. The index has touched its day's low of 41,831.74. Last week, the index ended at 41,831.74.
S&P 500: This index plummeted by 55.13 points or 0.96% to trade at 5,695.94. This was near its intraday low of 5,686.85. In the previous session, the index stood at 5,751.07.
Nasdaq Composite: The tech-heavy index dipped by 214 points or 1.2% to perform at 17,923.90, also near its day's low of 17,900.04. The index stood at 18,137.85 on October 4th.
Apart from geopolitical tensions, the mood in the US market dulled after a US judge ordered heavyweight Alphabet, the parent company of Google, to overhaul their mobile app business, allowing Android phone users to have more options.
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, as per Reuters.
On the latest performance, Trading Economics said that the benchmark 10-year Treasury yields climbed above 4% for the first time since August as investors recalibrated their expectations for Federal Reserve rate cuts following a strong jobs report. Traders have now adjusted their outlook, lowering the chances of a large 0.50% rate cut in November, with an 84% probability of a smaller 0.25% cut.
Trading Economics data further said, this week, key inflation data will be closely watched as the earnings season begins, featuring reports from major banks like JPMorgan, Wells Fargo, and Bank of New York Mellon. Sector-wise, utilities, communication services and consumer discretionary dragged the most, while the energy sector finished in the green.
In case of tech biggies, Apple (-2.2%), Microsoft (-1.6%), Alphabet (-2.4%), Amazon (-3%) and Meta (-1.9%) were down, while Nvidia (+2.5%) advanced.
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