Wall Street Slides as $100 Oil, Inflation Concerns Hit Investor Sentiment
Market Performance and Economic Drivers
By Pete Schroeder
Wall Street Indices and Global Stocks
Sept 9 (Reuters) - Wall Street ended lower on Wednesday, with oil prices still stuck at over $100 a barrel, as ongoing Gulf tensions and inflation fears weighed on investors.
All three major U.S. indices ended the day lower. The Dow Jones Industrial Average ended down by 0.77%, the S&P 500 dropped 0.48% and the Nasdaq Composite shed 0.64%. MSCI's gauge of stocks across the globe was down 0.52% following the U.S. market close.
Oil Prices Surge Amid Gulf Tensions
Stocks were negative all day, as headlines also focused on oil prices surging past $100 a barrel for the first time since July. Iran said it had attacked 10 ships near the Strait of Hormuz after the U.S. sank five Iranian oil tankers. [O/R]
Brent crude settled up 3.4% on the day, or $101.21 a barrel. U.S. West Texas Intermediate crude CLc1 was up $3.02, or 3.25%, at $96.05 a barrel. Both were the highest closing prices seen since May.
Bond Yields and Treasury Actions
At the same time, yields on benchmark U.S. 10-year notes rose 3.66 basis points to 4.841%, hitting levels not seen since November 2023, after the Treasury Department announced it would buy up to $6 billion in 10-to-20-year government bonds. The buyback was higher than the $4 billion the Treasury had signaled earlier. Some analysts had expected a larger purchase to support longer duration bonds.
Inflation and Central Bank Policy Challenges
"Brent breaking above $100 is a major psychological milestone for markets, but the bigger concern is what this means for inflation. A prolonged oil shock could keep price pressures elevated and complicate the path for central banks that are already navigating a difficult policy environment," said Lukman Otunuga, head of market research at FXTM.
Central Bank Decisions and Currency Movements
ECB and Bank of Japan Policy Expectations
CENTRAL BANK DECISIONS AHEAD
The euro edged higher ahead of the European Central Bank's policy decision on Thursday, with markets widely expecting a rate hike due to inflationary pressures from the Iran war.
The yen strengthened toward the nearly seven-month high touched against the dollar on Tuesday as traders exited short positions in the Japanese currency. Expectations are building for faster Bank of Japan rate hikes and a potential rush of repatriation of Japanese capital.
Dollar Index and Inflation Data
The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, rose 0.05% to 98.83.
U.S. producer and consumer price reports are set to be released later this week, with policymakers looking for further evidence that inflation pressures are continuing to cool.
Federal Reserve Rate Outlook
The latest Reuters survey of economists found about 70% expect the Federal Reserve to keep rates steady at its policy meeting next week, below the 90% expectation of steady rates in August.
"Financial markets remain genuinely divided over whether the FOMC will raise rates at next week's September meeting, an unusual state of uncertainty this close to a decision date," said Matthew Ryan, head of market strategy at global financial services firm Ebury.
Commodities Update
Gold Prices
Gold was up 0.98% to around $4,396 an ounce. [GOL/]
(Reporting by Kevin Buckland, Sruthi Shankar and Pete Schroeder; Editing by Toby Chopra, Ros Russell, Chizu Nomiyama, Deepa Babington and David Gregorio)
