Market Overview
US equities closed modestly higher as Treasury yields pulled back from multi-year peaks, a move driven by tempered Federal Reserve rate hike expectations and rising concerns over France’s fiscal outlook. This bond market rally, however, was partially offset by a significant surge in oil prices, fueled by escalating geopolitical tensions involving the US and Iran, which reignited longer-term inflation jitters. As the APAC session begins, Australian shares are projected to open higher, following the positive sentiment from Wall Street, with investor focus now turning to the upcoming US September payrolls report.
Markets
In the United States, the S&P 500 closed at 7,666.45, up 0.19%. The Nasdaq Composite recorded a modest gain of 0.04% to finish at 26,871.60, while the Dow Jones Industrial Average added 0.04% to end the day at 50,926.56.
US Treasury yields retreated significantly. The benchmark 10-year Treasury yield stood at 5.237%, down 5.60 basis points, after hitting an intraday high of 5.344% in the previous session—its highest level since 2002. The 30-year Treasury yield was at 5.603%, down 3.50 basis points, having scaled levels not seen in 24 years earlier.
Oil prices saw mixed movements in the wake of heightened geopolitical tensions. WTI crude settled at $92.87 a barrel, marking a 2.71% gain, while Brent crude traded at $102.19, down 1.29%, after an earlier surge above $102 a barrel.
In currency markets, the Australian Dollar traded lower against the US Dollar, standing at 0.6929, a decline of 0.86%. Gold traded at 4,207.30, up 0.49%, and Bitcoin gained 1.24% to trade at 84,594.
Australian shares are anticipated to rally, with ASX 200 futures pointing higher at the time of writing, tracking positive sentiment from Wall Street.
What Drove Markets
The temporary reversal in the multi-year Treasury bond sell-off was a primary catalyst for US equities. This was partly attributed to somewhat weaker US manufacturing data, which tempered expectations for a Federal Reserve rate hike in October. The probability of a quarter percentage point Fed rate increase briefly fell below 25%, significantly down from nearly 70% a week prior, settling at 26% near 4:30pm New York time. Additionally, a rush for safe-haven assets amid rising concerns about France’s fiscal and political outlook provided further support for Treasuries. While shorter-term yields benefited from reduced hike expectations, the long end continued to face pressure from long-term inflationary jitters, partly fueled by rising oil prices. Earlier economic indicators, including a softer-than-expected inflation report (PCE) and a significant upward revision to U.S. Q2 real gross domestic product growth (to 2.2% from 1.5%), also contributed to the fall in October Fed rate hike odds. Despite a rise in the Institute for Supply Management’s (ISM) manufacturing prices index to 77.9 in September from 71.1 in August, the ISM’s overall gauge of economic activity in the U.S. manufacturing sector expanded for a ninth consecutive month.
Geopolitical tensions in the Middle East significantly impacted oil markets. Reports indicated the US is dispatching a third aircraft-carrier strike group and additional Marine Corps ships, along with 9,000 to 10,000 more troops, to the region by the end of November. US President Donald Trump reportedly told aides he expects to resume strikes on Iran after the November midterm elections, stating he has to “make a decision” on Iran and threatening, “They’ll either sign a very fair deal, or they won’t exist any longer.” He also asserted that Washington controlled the Strait of Hormuz. This escalation introduced supply risk concerns, with reports of three tankers attacked this week in the Strait of Hormuz and refinery attacks by Iran and its Houthi allies. These events fueled oil prices despite recent crude flow recovery to pre-war levels.
The artificial intelligence (AI) trade continued to demonstrate resilience. Memory chipmaker Micron Technology closed at 1,097.39, up 3.03%, after posting “blockbuster earnings” with revenue quadrupling last quarter and strong current-quarter guidance. This performance reinforced confidence in AI demand, contributing to higher closes for other chip stocks.
Stocks to Watch
- Micron (MU): Closed up 3.03% at 1,097.39 following “blockbuster earnings” and strong current-quarter guidance, despite forecasting slightly softer gross margins and higher operating expenses for fiscal 2027.
- NVIDIA (NVDA): Closed up 1.09% at 230.86, benefiting from the broader resilience in the AI trade.
- AMD (AMD): Closed up 0.65% at 615.73, also supported by confidence in the AI sector.
- Nike (NKE): Shares dropped 0.71% to 35.15 after results missed estimates. This follows a year-to-date slump of over 44% for the athletic apparel giant.