Suffice it to say that stocks had a rather unpleasant day as the situation in the Middle East continued to push energy prices higher, stoking inflation fears. As attacks escalate in the region around the Strait of Hormuz, a critical global choke point for energy transport, oil tankers have slowed traffic, driving up costs and sparking speculative trading.
All major U.S. stock indices ended the day lower. The Dow Jones Industrial Average declined by 404 points to 48,501. The NASDAQ dipped 1.09% to 24,720. The S&P 500 retreated 0.94% to 6,817. The decline was broad-based, with only the communication services sector posting a gain of 0.08%, while all other sectors ended the day in the red. Sectors that are more sensitive to interest rate policies declined the most as the market recalibrated for a lower chance of interest rate cuts.
The bond market reacted more to the possibility of higher inflation compared with a typical flight to safety. The U.S. 5-year Treasury yield rose 2 basis points to 3.64%, and the 10-year yield rose 1 basis point to 4.06%. As rate-cut expectations are being pushed forward, gold, an asset highly sensitive to interest rates, declined by nearly 4% to 5,108.
The losses in stocks were much more severe earlier in the day until the President of the United States offered to escort and insure tankers and other vessels through the Strait of Hormuz, a move that curbed speculative trading in the market.
Tomorrow, private payroll data, the services gauge, and the Fed Beige Book will be released. We will continue to bring you updates on the market here at Adams Wealth Advisors. Thank you for listening.