(Bloomberg) --Treasuries climbed with oil amid signs Israel is preparing for a ground invasion of Gaza. Stocks edged lower.
US 30-year yields dropped seven basis points to 4.79%, unwinding part of Thursday's surge that was driven by a somewhat disappointing inflation reading and a weak bond auction. West Texas Intermediate crude hovered near $86 a barrel. Big tech led losses on Friday, while banks outperformed after solid results from JPMorgan Chase & Co., Wells Fargo & Co. and Citigroup Inc. Meantime, Boeing Co. sank on signs of worsening 737 Max aircraft production issues.
A sharper escalation of the conflict in the Middle East could bring Israel into a direct clash with Iran, a supplier of arms and money to Hamas, which the US and the European Union have designated a terrorist group. In that scenario, Bloomberg Economics estimates oil prices could soar to $150 a barrel and global growth drop to 1.7% — a recession that takes about $1 trillion off world output.
"The situation in Israel is a horrible one, and if it spreads into a regional conflict, the human costs will rise exponentially, and the financial costs around the globe will begin to rise very, very quickly as well," said Matt Maley, chief market strategist at Miller Tabak + Co. "In fact, we're surprised that the level of complacency in the stock market remains as high as it does right now."
Traders also sifted through economic data and comments from US central bank officials for clues on the policy outlook.
US consumers' year-ahead inflation expectations rose sharply in early October, driving a steep deterioration in Americans' views of their finances as well as sentiment. Federal Reserve Bank of Philadelphia President Patrick Harker said disinflation is under way and reiterated that he favors holding interest rates where they are, barring a sharp change in data.
Corporate News
- Microsoft Corp. said it completed its $69 billion purchase of Activision Blizzard Inc. after a nearly two-year fight with global regulators threatened to scuttle the deal.
- UnitedHealth Group Inc. lifted the lower end of its annual profit forecast as lower-than-expected-medical costs helped the company beat quarterly earnings estimates.
- BlackRock Inc. clients pulled a net $13 billion from long-term investment funds, the first outflows since the onset of the pandemic in 2020.
- PNC Financial Services Group Inc. said it started reducing headcount by 4% as the bank navigates fallout from higher interest rates that has eaten away at profitability.
- Dollar General Corp. Chief Executive Officer Jeff Owen stepped down after nearly a year in the role during which the shares plunged and workplace safety concerns mounted.
Some of the main moves in markets:
Stocks
- The S&P 500 fell 0.2% as of 10:53 a.m. New York time
- The Nasdaq 100 fell 0.7%
- The Dow Jones Industrial Average rose 0.2%
- The Stoxx Europe 600 fell 0.8%
- The MSCI World index fell 0.5%
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro fell 0.2% to $1.0503
- The British pound fell 0.3% to $1.2139
- The Japanese yen rose 0.1% to 149.66 per dollar
Cryptocurrencies
- Bitcoin was little changed at $26,761.05
- Ether rose 0.4% to $1,541.87
Bonds
- The yield on 10-year Treasuries declined seven basis points to 4.63%
- Germany's 10-year yield declined four basis points to 2.74%
- Britain's 10-year yield declined three basis points to 4.39%
Commodities
- West Texas Intermediate crude rose 3.8% to $86.07 a barrel
- Gold futures rose 2.6% to $1,931.50 an ounce
This story was produced with the assistance of Bloomberg Automation.
