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Financial Markets 03/05 09:34
NEW YORK (AP) -- Most stocks are falling on Wall Street Thursday, as oil
prices rise further, but the moves are less severe than earlier in the week.
The S&P 500 slipped 0.2% in morning trading, coming off a frenetic start to
the week that saw financial markets worldwide swerve sharply, sometimes hour by
hour. The Dow Jones Industrial Average was down 452 points, or 0.9%, as of
10:15 a.m. Eastern time, and the Nasdaq composite was 0.1% higher.
Markets again seem to be following the cue of oil prices. Worries are high
that a long-term spike because of the war with Iran could exhaust households'
ability to spend, as well as grind down the global economy and push interest
rates higher.
A barrel of Brent crude, the international standard, rose 2.9% to $83.74.
That's up from close to $70 late last week. A barrel of benchmark U.S. crude
climbed 4.6% to $78.15.
Oil prices rose after Iran launched a new wave of attacks against Israel,
American bases and countries around the region. The war's escalations are
raising worries about how long disruptions could last for the production and
transport of oil and natural gas in the region.
Prices at U.S. gasoline pumps have already jumped because of it. The average
price for a gallon is $3.25, up 9% from $2.98 a week ago, according to auto
club AAA.
To be sure, the U.S. stock market has a history of bouncing back relatively
quickly following conflicts in the Middle East and elsewhere. That has many
professional investors suggesting patience and riding through the market's
swings.
"While further escalation remains a risk, we think the more likely outcome
is an increase in market risk aversion that likely lasts only a short time
until investors can see a winding down of hostilities," according to Scott
Wren, senior global market strategist at Wells Fargo Investment Institute.
But if oil prices spike, like to $100 per barrel, and stay there, it could
be too much for the global economy to stomach. Uncertainty about that has
caused this week's sharp swings, and much will depend on what happens with the
Strait of Hormuz. Roughly a fifth of the world's oil typically sails through
the narrow waterway off Iran's coast.
Stocks of retail chains fell to some of the U.S. market's worst losses on
Thursday. High gasoline prices mean their customers would have less to spend on
other things.
American Eagle Outfitters fell 12.4% even though it reported stronger profit
and revenue for the latest quarter than analysts expected.
Airlines also took sharp losses. Higher oil prices are increasing their
already big fuel bills, while the war has also left passengers stranded across
the Middle East.
American Airlines lost 4.4%, United Airlines fell 4.8% and Delta Air Lines
sank 4.5%.
Wall Street's losses would have been worse if not for Broadcom. The chip
company's stock rose 4.8% after it reported stronger profit and revenue for the
latest quarter than analysts expected.
It's one of Wall Street's most influential stocks because it's one of the
biggest by total value, and CEO Hock Tan said it benefited from a 74% jump in
revenue for AI chips.
In the bond market, Treasury yields jumped as rising oil prices put more
upward pressure on inflation, which could keep the Federal Reserve from cutting
interest rates.
The yield on the 10-year Treasury rose to 4.12% from 4.09% late Wednesday
and from just 3.97% before the war with Iran started.
The Fed could keep interest rates high to keep a lid on inflation. But high
interest rates would also keep it more expensive for U.S. households and
companies to borrow money, grinding down on the economy.
The central bank had indicated it planned to resume its cuts to interest
rates later this year, in hopes of giving a boost to the job market and
economy. Because of the war and higher oil prices, traders have pushed their
forecasts further into the summer for when the Fed could begin cutting rates
again.
Several reports on the U.S. economy also came in mixed.
One said fewer U.S. workers filed for unemployment benefits last week than
economists expected. That's an encouraging signal for the job market.
A second report said productivity for U.S. workers slowed sharply at the end
of last year. That could be a discouraging sign for the economy because high
productivity allows wages to rise for workers without putting upward pressure
on inflation. But economists said last quarter's numbers were affected by the
U.S. government shutdown.
In stock markets abroad, indexes rebounded in Asia following historic losses
a day before. South Korea's Kospi jumped 9.6% to recover much of its 12.1%
plunge from Wednesday, which was its worst loss ever.
But indexes fell in Europe as oil prices began to accelerate. France's CAC
40 fell 0.4%, and Germany's DAX lost 0.4%.
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AP Writers Kim Tong-hyung and Elaine Kurtenbach contributed.
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