Wall Street dampened by Middle East tensions and rising returns - Meta wins after AI device launch
Quick Look
- US stock markets were mixed as investors kept an eye on the Middle East crisis and rising bond yields.
- The S&P 500 and Nasdaq closed almost unchanged, while the Dow Jones fell slightly.
- Meta rose 4.5 percent after unveiling an AI wearable device, while MGM Resorts fell 11 percent after withdrawing its takeover offer.
AI-generated summary
Why It Matters
Markets are reacting to the combination of geopolitical risks in the Middle East, rising energy prices and expectations of further interest rate hikes by the US Federal Reserve following the latest rate hike.
US investors are looking anxiously at the Middle East conflict and high energy prices. It's all about oil, notes one analyst. Yields on 30-year US Treasury bonds rose to their highest level since 2004.
Fears of escalation in the Middle East and rising bond yields have slowed Wall Street. The broad S&P 500 closed almost unchanged at 7,704 points, as did the technology-heavy Nasdaq, which closed at 26,939 points. The leading index Dow Jones lost 0.3 percent to 51,349 points.
Indexes rebounded from intraday lows in late trading after Reuters reported that U.S. and Iranian negotiators were exploring a gradual exit from the war. This stipulates that Tehran reopens the Strait of Hormuz and that Washington lifts its economic blockade against Iran. A Houthi missile attack on Saudi Arabia had previously fueled concerns about supply bottlenecks and pushed up the price of North Sea Brent by more than three percent to $107 per barrel.
"It's really all about oil and inflation and the impact on interest rates and what that means for capital markets," said Bill Northey, investment director at U.S. Bank Wealth Management. The yield on 30-year US government bonds rose to its highest level since 2004. Higher yields make the securities, which are considered safe, more attractive for investors compared to stocks. In addition, robust economic data and statements from New York Fed President John Williams fueled expectations that the US Federal Reserve could raise interest rates further this year after the increase last week.
Meta makes a profit jump
When it comes to individual values, technology papers were inconsistent. While Microsoft lost 0.5 percent and Broadcom 1.3 percent, Advanced Micro Devices rose 2.4 percent. Meta climbed 4.5 percent after the social media company unveiled a new wearable device for its recently launched AI assistant.
Oracle, on the other hand, fell 3.5 percent. According to a media report, the company had declared force majeure for a data center in the state of New Mexico. The shares of the project developer Blue Owl also fell sharply in this context.
The shares of casino operator MGM Resorts fell by eleven percent after media mogul Barry Diller's People Inc withdrew its takeover offer.
What to Watch
AI outlook — possibilities, not facts
The US Federal Reserve could raise interest rates further this year.
Possible · Within months
The price of oil will remain volatile as long as geopolitical tensions in the Middle East persist.
Likely · Within weeks
Open Questions
- Will the agreed framework agreement between the USA and Iran lead to lasting detente?
- How long will high energy prices last?
- Will the Fed actually make further interest rate hikes this year?
