Stocks Slip as Mideast Flare-Up Lifts Oil, Yields: Markets Wrap

(Bloomberg) — Stocks fell while oil and bond yields climbed after fresh attacks in the Middle East fueled doubts over whether an end to the war is imminent.

S&P 500 futures slipped 0.1%, pointing to the benchmark’s first decline in more than a week. Nasdaq 100 contracts dropped 0.3%. Brent rose 2.6% to above $96 a barrel after the US carried out airstrikes on an Iranian military site. Bonds fell in most markets, with the Federal Reserve’s preferred top-line inflation gauge expected to climb closer to 4% in data due Thursday.

The latest flare-up between the US and Iran showed the fragility of the ceasefire, despite traders mostly viewing a deal as only a matter of time. The prospect of oil-driven inflation is also building, prompting central bankers to increasingly warn that interest rates may need to rise.

“The market is caught between two very different worlds,” said Aneeka Gupta, director of macro-economic research at Wisdomtree. “One where we get a deal, and you have a follow-through of a very powerful cyclical recovery, and another where the conflict process deepens the stagflation impact on the economy.”

Europe’s Stoxx 600 fell 0.67, with technology stocks outperforming despite weakness in Nasdaq 100 futures. A gauge for Asian stocks snapped its longest winning streak since February. The dollar rose for a third straight day. Bitcoin fell to its lowest level in more than six weeks.

The Federal Reserve’s Philip Jefferson warned inflationary risks remained tilted to the upside even as he expects the effects of tariffs and higher energy costs to wear off. Minneapolis Fed President Neel Kashkari told CNBC that consumer prices were still “much too high.”

In South Korea, policymakers are increasingly leaning toward higher borrowing costs in coming months. Fed Governor Lisa Cook said Wednesday inflation is headed in the wrong direction and that she would be prepared to raise rates if that persists.

The US personal consumption expenditures price index likely jumped 3.8% in April from a year ago. That would put inflation a full percentage point higher than it was in February, marking the biggest two-month acceleration since 2021.

Holger Schmieding, chief economist at Berenberg Bank, said the fact that markets have given up on Fed rate cuts for the foreseeable future meant it would take a major downside surprise in core PCE for bonds to move significantly.

“For the question if and by how much the Fed may raise rates later on, we need to watch whether the Iran shock filters through into non-energy prices,” Schmieding said.

Corporate News:

Snowflake Inc. shares jumped 35% in premarket trading after the software maker gave a stronger-than-expected annual outlook and signed a $6 billion multiyear agreement to use Amazon.com Inc.’s cloud services and chips. Salesforce Inc. gave a revenue outlook for the current period that fell just short of analysts’ estimates, unnerving investors already concerned about the possibility that artificial intelligence will disrupt the software business. Perella Weinberg Partners is cutting almost 10% of its workforce, including a dozen partners, as the investment bank channels resources into higher-performing areas of its business, according to a person familiar with the matter. A unit of Dell Technologies Inc. won a $9.7 billion contract to help the US military handle its licenses for Microsoft Corp. software related to email, spreadsheets and other needs across classified and unclassified systems, the Pentagon said. Toyota Motor Corp.’s global sales posted their third straight month of year-on-year declines, as disruptions due to the Middle East conflict ripple across its business, with exports to the region down by more than 90%. Some of the main moves in markets:

Stocks

The Stoxx Europe 600 fell 0.7% as of 9:31 a.m. London time S&P 500 futures fell 0.1% Nasdaq 100 futures fell 0.3% Futures on the Dow Jones Industrial Average were little changed The MSCI Asia Pacific Index fell 0.9% The MSCI Emerging Markets Index fell 0.9% Currencies

The Bloomberg Dollar Spot Index rose 0.1% The euro fell 0.1% to $1.1611 The Japanese yen was little changed at 159.50 per dollar The offshore yuan was little changed at 6.7803 per dollar The British pound fell 0.2% to $1.3400 Cryptocurrencies

Bitcoin fell 2.7% to $73,109.13 Ether fell 3.8% to $1,982.48 Bonds

The yield on 10-year Treasuries advanced two basis points to 4.50% Germany’s 10-year yield advanced two basis points to 3.00% Britain’s 10-year yield was little changed at 4.86% Commodities

Brent crude rose 2.6% to $96.78 a barrel Spot gold fell 1.4% to $4,390.77 an ounce This story was produced with the assistance of Bloomberg Automation.

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