Stocks Fall as Oil Rally Keeps a Lid on Treasuries: Markets Wrap

A resurgence in oil prices dragged down global stocks and bonds on Friday, stoking inflation concerns just days before the Federal Reserve decides on interest rates. Brent crude settled near $117 per barrel after renewed violence in the Middle East threatened supply lines. The Dow Jones Industrial Average slipped 1.2%, while the S&P 500 dropped 0.5% by the close. Treasury yields retreated from their previous session's gains, capping the rally in government debt. Although selling pressure on technology shares eased slightly, a gauge of chipmakers still recorded its longest weekly decline since November. Bank of America strategist Michael Hartnett noted that investors' risk-off mood will likely persist into mid-November. He attributed this caution to jitters surrounding the artificial intelligence trade and upcoming midterm elections. In a client note, Hartnett advised maintaining a tactical risk-off stance, expecting lower yields, weaker stocks, and a declining US dollar. Brian Jacobsen of Annex Wealth Management observed that the recent selloff in AI-linked stocks demonstrates how crowded trades suffer when sentiment shifts. He suggested that rebalancing portfolios by trimming overgrown themes and adding lagging assets helps manage risk without predicting market direction. Florian Ielpo at Lombard Odier Asset Management identified four forces driving the week's volatility: solid earnings and attractive bond yields versus high financing costs and sovereign stress. He argued that the issue is not expensive equities, but rather bonds that are no longer considered dear. Ulrike Hoffmann-Burchardi of UBS maintained that robust earnings should continue supporting stocks, noting that strong AI demand and current bond yields provide attractive income. She stated that geopolitical developments alone do not justify a broadly defensive stance. Tiffany Wilding at Pacific Investment Management Company pointed out that the Federal Reserve recognizes AI is boosting US demand. With inflation above target, she viewed modest rate adjustments and tighter financial conditions as sensible policy, though she believed the Fed has room for a measured approach given that inflation is elevated but not accelerating. Corporate news dominated headlines alongside macro trends. SpaceX is aiming to secure at least 80,000 cell sites across the United States and is negotiating with at least one major cellular infrastructure firm to achieve this. Apple Inc. sold out of its limited in-store inventory for the new iPhone Duo, highlighting strong demand for the foldable device priced near $2,000. American Express announced it would cut 5% of its global workforce under CEO Steve Squeri to control rising costs. SLB, the largest oilfield services provider, reported a gradual recovery in its Middle East business despite disruptions from the Iran conflict. Bristol Myers Squibb disclosed a death in clinical trials for an experimental cell therapy targeting autoimmune diseases, raising safety questions about the treatment class. Market strategists warned that rising oil prices were overtaking credit concerns as the primary threat to equity stability. Michael Ball, a macro strategist, described oil as taking the baton from credit issues in threatening the rotation supporting the S&P 500. The interplay between energy costs, technological valuations, and monetary policy expectations defined the trading session, leaving investors cautious heading into the weekend.