Wall Street’s main indexes fell on Friday, with the financials-heavy Dow at a more than three-month low, as the conflict raging in the Middle East threatened to fuel inflation and data showed the economy unexpectedly shed jobs in February.
The data pointing to a weakening jobs market came amid a strike by healthcare workers and harsh winter weather. The unemployment rate increased to 4.4%.
Following the data, traders raised expectations that the Federal Reserve will lower interest rates by 25 basis points in June, odds of which now stand at about even, up from about 35% earlier in the day, according to LSEG-compiled data.
“Today’s numbers may have put the Fed between a rock and a hard place,” said Ellen Zentner, chief economic strategist at Morgan Stanley Wealth Management.
“Significant weakening in the labor market would support a rate cut, but given the risk that higher-for-longer oil prices could trigger another inflation surge, the Fed may feel compelled to remain on the sidelines.”
The U.S.-Israel air campaign against Iran was nearing a week with no end in sight. Oil prices have surged the most this week since Russia’s 2022 invasion of Ukraine as shipping through the strategic Strait of Hormuz ground to a halt.
Natural gas producer Qatar’s energy minister said it would take “weeks to months” to resume normal deliveries even in the case of an immediate ceasefire, according to a report, adding that he expects all Gulf energy producers to shut down exports within weeks, which could drive oil to $150 a barrel.
Brent crude prices hit $90 a barrel, sending airlines American and Delta about 3% lower. The S&P 500’s passenger airlines subindex is on track for a near 13% weekly drop.
At 09:52 a.m. ET, the Dow Jones Industrial Average fell 887.53 points, or 1.85%, to 47,067.21, the S&P 500 lost 106.95 points, or 1.57%, to 6,723.35 and the Nasdaq Composite lost 316.55 points, or 1.40%, to 22,431.29.
All the major sectors on the S&P 500 traded in the red, while the banking subindex tanked 3.7% to a more than four-week low.
Western Alliance shares fell 12.9% after the bank said it had sued Jefferies Financial for not making a payment of $126.4 million due to the regional lender for loans tied to bankrupt auto parts supplier First Brands Group. Jefferies shares dropped 9.6%.
Wall Street’s fear gauge, the CBOE volatility index, spiked to four-month high, while futures tied to the rate-sensitive Russell 2000 index dropped 2.3%.
AI-chip stocks Nvidia and Advanced Micro Devices were down about 0.8% and 1.4%, respectively. U.S. officials are debating a new regulatory framework for exporting artificial intelligence chips, although the rules were not final.
Marvell Technology jumped 16.2% after the chip company forecast fiscal 2028 revenue above estimates.
Despite the gloomy mood, U.S. stocks have fared better than their Asian and European counterparts this week. Also supporting sentiment, the United States is perceived to be better shielded from energy shocks as it is a net exporter of oil.
Federal Reserve Governor Christopher Waller said on Bloomberg Television that he does not expect the global jump in oil prices to lead to persistent inflation or warrant a change in monetary policy.
Declining issues outnumbered advancers by a 7.07-to-1 ratio on the NYSE and by a 4.04-to-1 ratio on the Nasdaq.
The S&P 500 posted 4 new 52-week highs and 3 new lows while the Nasdaq Composite recorded 23 new highs and 89 new lows.
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