(March 12): US stocks rose at the opening bell on Friday as signs of a sluggish economy boosted hopes for an interest-rate cut from the Federal Reserve. Traders also pored over the latest headlines from the Middle East war.
The S&P 500 Index advanced 0.8% at 9.43am in New York, rebounding after a three-day skid. The tech-heavy Nasdaq 100 Index rose 0.8%, while Bloomberg’s gauge for the Magnificent Seven was little changed, hovering near correction territory. Brent crude dropped 1.4% to US$99.02 a barrel.
Bond traders nearly priced in one Fed rate cut for the year after data revealed a more discerning consumer, sticky inflation and weaker growth. Consumer spending barely rose in January after economic growth was weaker than previously reported at the end of last year.
“GDP and the job market have been expanding, but the rate of change has been slowing, which leads to concerns about the overall economy and that was even before we stared a war in the Middle East, which spiked the price of oil,” said Chris Zaccarelli, chief investment officer at Northlight Asset Management.
Inflation-adjusted consumer spending increased 0.1% from the prior month, according to Bureau of Economic Analysis data. The personal consumption expenditures price index, which is favoured by the Fed, rose 0.4%. Another report from the government agency showed the US economy expanded at a 0.7% annualised rate in the fourth quarter compared to an initial estimate of 1.4%.
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Attention now turns toward the Fed’s meeting next week, where officials are expected to leave interest rates unchanged. That prediction had preceded the latest events in the Middle East.
“We expect the Fed to highlight the uncertainty on both sides of the mandate,” LPL Financial’s Jeffrey Roach said. “Inflation will be impacted by the war and unemployment will be impacted by the disruptions in the labor market. Expect to see some important revisions in the upcoming Summary of Economic Projections next week.”
War rolls on
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Traders were also watching the latest developments in the conflict between the US and Iran. Earlier, Defense Secretary Pete Hegseth said Iran’s Supreme Leader Mojtaba Khamenei had been wounded, and “likely disfigured”, as part of the US and Israeli campaign against the country. The comments came after President Donald Trump threatened Iran with further attacks on social media.
“On a very-short-term basis, it will likely continue to be a ‘headlines-driven’ market,” said Miller Tabak’s Matt Maley. “Therefore, if we see any compelling tweets out of the president, either bullish or bearish, it should have a meaningful impact on the market today.”
Khamenei and Trump both struck defiant tones on Thursday. Khamenei indicated on Thursday that Iran would seek to ensure the Strait of Hormuz would remain closed. Trump, meanwhile, said stopping Iran from having nuclear weapons and threatening the Middle East was of “greater interest and importance” to him than the cost of oil.
The combination of spiking oil prices and private credit concerns are causing market activity to resemble the lead-up to the global financial crisis, Bank of America Corp strategist Michael Hartnett said. Hartnett noted that asset performance this year has been “more ominously close” to the price action seen from mid-2007 to mid-2008.
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