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(Sharecast News) - The S&P 500 and Nasdaq retreated further from their recent highs on Thursday as a surge in oil prices hammered risk appetite in the AI sector, while the Dow eeked higher as defensive stocks rose.
Tech stocks weighed heavily on the S&P 500 and Nasdaq, which fell 0.5% and 1.3%, respectively, with AI and semiconductor names under the most pressure. Both indices fell for the second straight session after reaching new record closing highs on Tuesday.
AI hardware and infrastructure stocks such as Coherent, Lumentum and Bloom Energy all dropped, along with chip firms Broadcom and Nvidia.
The Dow rose 0.1%, benefiting from its weighting towards more cyclical, consumer-facing stocks such as Home Depot, McDonald's, Coca-Cola and Walmart, which all performed well as Treasury yields pulled back from multi-decade highs.
Front-month Brent crude futures were 4.1% higher at $104.28 a barrel, while WTI crude was up 3.6% at $91.49 a barrel, on fears that Donald Trump is preparing "massive" strikes on Iran.
According to Axios, the Pentagon instructed US Central Command several days ago to conclude preparations for resuming major combat operations in Iran. Reports suggest that potential strikes could happen before the US midterm elections in early November and possibly the Israeli elections a week earlier.
Investors were also digesting the attacks by Yemen-backed Houthis on two Saudi airports, alongside news of escalating strikes on commercial tankers in the Strait of Hormuz.
Meanwhile, prices were being lifted by fears that tropical storm Isaias, which was set to reach the US Gulf Coast by Friday, could disrupt US production.
Bond yields pulled back after hitting their highest since 2002 the previous session, with the 10-year US Treasury yield down 4.9 basis points at 5.232%. Comments from Federal Reserve governor Christopher Waller on Wednesday lifted borrowing costs after he warned that further rate hikes may still be required to bring inflation under control.
In the corporate space, PepsiCo rose after strongerthanexpected thirdquarter revenues, as the soft drinks group overcame softer demand in North America with a marked improvement in its global snacks business.
Chipotle shares were also higher on reports that Starbucks had considered taking over the fast food chain.