Equities fall while oil slips amid uncertain Middle East outlook
Market Movements and Investor Sentiment
By Sinéad Carew and Amanda Cooper
NEW YORK/LONDON, June 9 (Reuters) - MSCI's global equities gauge managed a small gain on Tuesday with little support from Wall Street where heavyweight technology stocks stumbled while investors opted for safer bets, and oil prices settled lower as updates from the Middle East brought little clarity on progress toward peace.
Geopolitical Tensions in the Middle East
On Monday, Iran and Israel had boosted hopes that tensions would ease as they said they would stop attacking each other. But U.S. President Donald Trump said on Tuesday that Iran had shot down a U.S. Apache helicopter that was patrolling the Strait of Hormuz overnight, and he vowed to respond, without providing details.
This was after Israel attacked the historic port city of Tyre in southern Lebanon on Tuesday, killing at least eight people. Iran had warned on Monday that it would resume hostilities if Israel continued to attack its ally Hezbollah in Lebanon.
Oil Market Impact
Meanwhile, the U.S. Energy Information Administration said oil stockpiles in the world's largest economies were headed toward their lowest levels since at least 2003. The EIA also said it expects global oil demand to decline in 2026, reversing its earlier forecast for an increase.
Equities and Sector Rotation
In equities, trading in Wall Street's main indexes was choppy, with the S&P 500's heavyweight technology sector falling as much as 5.5% before closing with a 1.8% loss for the day. Sahak Manuelian, managing director for global equities trading at Wedbush Securities, said investors were selling technology stocks and rotating into more defensive sectors such as real estate, utilities and healthcare.
"Today we tried to rally early, and it was very, very short-lived," said Manuelian, adding that investors were shedding stocks that had gained a lot recently and preparing for the highly anticipated market debut of Elon Musk's SpaceX this week.
"Investors are looking at their portfolios and seeing how much tech has moved and then also coming to grips with the SpaceX IPO, which is scheduled for this Friday, and probably have to bookmark some dollars for that. They're trying to take some profits off some of these other things that have run so much in such a short period of time and probably looking to see where they can chase alpha in other sectors of the market," Manuelian said.
Inflation and Interest Rate Outlook
Inflation Data and Federal Reserve Policy
INFLATION AND RATE WORRIES
Investors were also bracing for the scheduled release of consumer inflation data on Wednesday, according to Gene Goldman, chief investment officer at Cetera, who sees inflation concerns putting the Federal Reserve's interest rate policies in the spotlight.
"There is a lingering bit of caution as investors are a bit worried about tomorrow’s potentially high inflation readings. Higher-than-expected inflation further brings the Fed to the forefront as a headline risk," Goldman said.
Since the release last Friday of a stronger-than-expected jobs report for May, traders have increased bets that the Fed will hike rates, with the probability for a 25-basis-point increase by December close to 43% and bets on a 50-basis-point increase rising to nearly 21%, from 12% last week, according to CME Group's FedWatch tool.
Major Index Performance
On Wall Street, the Dow Jones Industrial Average rose 84.93 points, or 0.17%, to 50,870.94, the S&P 500 fell 19.29 points, or 0.26%, to 7,386.44 and the Nasdaq Composite fell 250.84 points, or 0.97%, to 25,678.82.
MSCI's gauge of stocks across the globe rose 1.94 points, or 0.18%, to 1,102.90.
The pan-European STOXX 600 index finished down 0.5% after rising earlier.
The CBOE volatility index, sometimes referred to as Wall Street's fear gauge, finished up 0.95 points at 19.87 after earlier hitting 23.34, which was its highest level since April 7.
Currency and Crypto Markets
Dollar and Major Currencies
In currencies, the dollar pared earlier losses as uncertainty increased about the ceasefire with Trump's comment about a response to the downed helicopter.
The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, fell 0.1% to 99.94, with the euro up 0.09% at $1.1544.
Against the Japanese yen, the dollar strengthened 0.13% to 160.38.
Cryptocurrency Performance
In cryptocurrencies, bitcoin fell 2.08% to $62,154.00.
Bond and Commodity Markets
U.S. Treasury Yields
U.S. Treasury yields dipped as traders waited for May's consumer inflation report for signs of whether price pressures are continuing to build.
The yield on benchmark U.S. 10-year notes fell 3 basis points to 4.52%, from 4.55% late on Monday while the 30-year bond yield fell 2.6 basis points to 4.9977%.
The 2-year note yield, which typically moves in step with interest rate expectations for the Federal Reserve, fell 3.6 basis points to 4.122%, from 4.158% late on Monday.
Energy and Precious Metals
Oil Prices
In energy markets, U.S. crude settled down 3.4%, or $3.10, at $88.20 a barrel. Brent settled at $91.45 per barrel, down $2.80 or 2.97% on the day.
Gold and Silver
In precious metals, gold prices fell on rising expectations for a U.S. interest rate hike this year as investors waited for the inflation data.
Spot gold fell 1.59% to $4,259.89 an ounce. Spot silver fell 4.26% to $65.26 an ounce.
(Reporting by Sinéad Carew in New York, Amanda Cooper in London, Wayne Cole in Sydney; Editing by Thomas Derpinghaus, Gareth Jones, Will Dunham and Nia Williams)
