(Bloomberg) — Bonds and gold rose while stocks fell as investors retreated to safer corners of the market on indications that Iran is preparing to attack Israel.
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Technology stocks were the worst performers, with Apple Inc. and Nvidia Corp. fell more than 3%, while the Nasdaq 100 lost 1.7% and the S&P 500 fell 1%. Government bond yields were lower across the board, while two-year yields fell to around 3.6%.
A report that the US is actively supporting preparations to defend Israel against the possible attack has led to gains in port assets. Gold climbed to nearly $2,670 an ounce as the dollar strengthened.
Meanwhile, economic data sent mixed signals. The US ISM price index fell the most since May 2023, while US job openings rose to a three-month high in August, contradicting other data showing weakening demand for workers.
Oil prices rose as risks of a wider conflict in the Middle East increased. Earlier, Israel said it had begun “targeted ground attacks” in Lebanon.
Wall Street’s fear gauge – the VIX – spiked higher, hitting a key level that usually signals more volatility ahead.
Tuesday begins a historically positive, but often volatile, period for stocks. The S&P 500 set its 43rd closing record on Monday, staging a third-quarter rally that capped its longest winning streak since 2021.
“October was a much friendlier month for bulls from start to finish, but it wasn’t a walk in the park in between,” said Bespoke Investment Group strategists. According to Bespoke data going back to 1945, the average intra-month decline of around 4.6% is the largest of any month.
Money markets imply a one-in-three chance that the Fed will cut rates again by half a point in November, and estimate a total of about 190 basis points of easing by the end of next year. That scenario may not turn out as expected, Larry Fink warned.
“The amount of easing in the forward curve is crazy,” said Fink, the CEO of BlackRock Inc. in an interview with Bloomberg Television. “There is room for more easing, but not as much as the forward curve would indicate.”
A handful of policymakers discussed the implications of AI and other innovations at the Technology-Enabled Disruption conference on Tuesday.
Eurozone inflation fell below the European Central Bank’s 2% target for the first time since 2021, prompting money markets to tighten expectations for another quarter-point cut by the ECB this month. Earlier, ECB President Christine Lagarde said the bank was becoming more optimistic about getting price pressures under control.
Main events this week:
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Atlanta Fed President Raphael Bostic, Fed Governor Lisa Cook, Richmond Fed President Thomas Barkin and Boston Fed President Susan Collins speak Tuesday: Watch here
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ECB policymakers speaking on Tuesday include Olli Rehn, Luis de Guindos, Isabel Schnabel and Joachim Nagel
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BOE chief economist Huw Pill will speak on Tuesday
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South Korea CPI, S&P Global Manufacturing PMI on Wednesday
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Fed speakers include Thomas Barkin of Richmond, Beth Hammack of Cleveland, Alberto Musalem of St. Louis and Fed Governor Michelle Bowman on Wednesday
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U.S. Nonfarm Payrolls, Friday
Some of the major moves in the markets:
Stocks
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The S&P 500 was down 1% as of 11:36 a.m. New York time
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The Nasdaq 100 fell 1.7%
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The Dow Jones Industrial Average fell 0.4%
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The Stoxx Europe 600 fell 0.4%
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The MSCI World Index fell 0.9%
Currencies
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The Bloomberg Dollar Spot Index rose 0.3%
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The euro fell 0.7% to $1.1062
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The British pound fell 0.8% to $1.3271
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The Japanese yen fell 0.2% to 143.87 per dollar
Cryptocurrencies
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Bitcoin fell 2% to $62,485.38
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Ether fell 3.3% to $2,528.54
Bonds
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The yield on ten-year government bonds fell by five basis points to 3.73%
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The German ten-year yield fell by eight basis points to 2.04%
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The British ten-year yield fell by six basis points to 3.95%
Raw materials
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West Texas Intermediate crude rose 4.5% to $71.26 a barrel
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Spot gold rose 1.1% to $2,663.41 an ounce
This story was produced with the help of Bloomberg Automation.
–With assistance from Allegra Catelli, Alice Atkins, Cecile Gutscher, and Margaryta Kirakosian.
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