Nasdaq and S&P 500 rise as oil and yields fuel market caution

US stocks ended a turbulent week with gains for the Nasdaq Composite and S&P 500, while the Dow Jones Industrial Average slipped as investors weighed rising bond yields, expensive oil and the outlook for interest rates.

The session on Friday, Sep 18, brought only modest moves. The Dow fell 95.40 points, or 0.18 per cent, to 51,682.64. The S&P 500 added 12.74 points, or 0.17 per cent, to 7,650.50, while the Nasdaq climbed 104.25 points, or 0.40 per cent, to 26,522.55.

The Business Times reported that benchmark US Treasury yields moved above 5 per cent during the session. Crude prices retreated from their highs but remained above US$100 a barrel, keeping the cost of energy at the centre of market concerns.

The week had been shaped by the US Federal Reserve’s widely anticipated interest-rate increase. Trading before the decision was marked by uncertainty, followed by a reassessment of what the move could mean for shares and bonds. The S&P 500 finished the week with a small decline, while the Nasdaq ended above its level from the previous Friday. The Dow recorded its sharpest weekly percentage fall since March.

Oil and interest rates weigh on sentiment

The latest rise in oil prices has pushed diesel costs to record levels. That could add pressure to expenses in areas such as agriculture and shipping, potentially widening inflationary effects across the economy.

Oil prices eased after China, responding to a request from Saudi Arabia, urged Iran to curb attacks by Houthi rebels on Saudi oil infrastructure. Even after the pullback, crude remained high enough to reinforce anxiety about inflation and the possibility that interest rates may stay elevated.

Investors were also reluctant to take large directional positions before the weekend. Chuck Carlson, chief executive of Horizon Investment Services in Hammond, Indiana, said traders were considering both the immediate consequences of the Federal Reserve’s actions and their longer-term impact on equities and fixed-income investments. He described the market as exhausted after an unusually active week and said external developments could produce sharp trading when markets reopened.

Financial markets now assign a 55.4 per cent chance to another Federal Reserve rate increase at its October meeting, according to CME’s FedWatch tool. That estimate was 42.5 per cent a week earlier and 7.2 per cent a month ago.

The global policy environment is also tightening. The Bank of Japan raised borrowing costs to a 31-year high, following moves by the Federal Reserve and the European Central Bank as policymakers seek to restrain inflation linked to the Iran war. The Bank of England held its rates unchanged, although it warned that further increases could come.

Technology leads, while market breadth weakens

Technology was the strongest-performing group among the 11 major sectors in the S&P 500. Utilities recorded the largest percentage decline. The contrast between the headline index gains and the wider weakness beneath them showed how narrowly the market’s advance was concentrated.

On the New York Stock Exchange, declining shares outnumbered rising ones by 1.78 to 1. The exchange recorded 92 new 52-week highs and 346 new lows. On the Nasdaq, 1,973 stocks advanced while 2,810 fell, producing a decline-to-advance ratio of 1.42 to 1. The S&P 500 registered five new 52-week highs against 30 new lows, while the Nasdaq recorded 45 new highs and 162 new lows.

Trading activity was heavy. US exchanges handled 25.29 billion shares, compared with an average of 16.19 billion over the previous 20 full trading sessions.

Individual companies produced some of the day’s sharper moves. Berkshire Hathaway shares edged down after the company said Warren Buffett would leave the chairman’s role and become chairman emeritus. The announcement came nine months after Greg Abel took over as chief executive.

Xenon Pharmaceuticals fell 30.7 per cent after temporarily stopping enrolment in clinical trials for an experimental treatment for major and bipolar depression. The pause followed reports of side effects.

Cryptocurrency-related companies moved in the opposite direction. Coinbase, Strategy and Robinhood gained between 9.1 per cent and 16.4 per cent as bitcoin rose 5.9 per cent.

The mixed finish left investors balancing support from semiconductor and other technology shares against broader concerns about inflation, monetary policy and the possibility of further shocks in energy markets. Those competing forces are likely to remain central as trading begins the following week.