Market Rebound
U.S. Stocks Rebound, Ending Four-Day Slide as Oil Prices Ease
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Key Points
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West Texas Intermediate crude ended an eight-session winning streak but still gained 9.4% for the week, reflecting expectations of a prolonged disruption to Middle Eastern oil flows.
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Iran-backed Houthi militants seized a strategic island and a mainland coastal town near the Bab al-Mandeb strait, effectively tightening their control over one of the world’s most important shipping chokepoints.
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Communication-services and consumer-discretionary stocks led the S&P 500’s sector gains, rising 1.35% and 1.13%, respectively, while utilities and health care declined 0.34% and 0.14%.
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The University of Michigan’s consumer-sentiment index fell to 47.8 in September from 51.7 at the end of August, returning close to historically low levels reached earlier in the year.
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Bank of America Global Research warned that declining to raise rates after the inflation data and recent Treasury-yield increases could trigger a significant selloff in long-term bonds. Strategists said such a decision would risk “significant selloff at the long end.”
U.S. stocks rebounded Friday after a four-day slide, with the Dow rising 0.98%, the S&P 500 gaining 0.86%, and the Nasdaq advancing 0.96%, as easing oil prices provided temporary relief despite sticky inflation data. MarketScreener reported that the rebound came even as August consumer prices rose 0.4% monthly and 3.4% annually, remaining stubbornly above the Federal Reserve's 2% target and keeping rate-hike expectations elevated at 86%–90% for next week's policy meeting.
Oil prices fell sharply on Friday—Brent crude dropped 2.8% to $104.61 a barrel and West Texas Intermediate fell 2.4% to $100.05—yet both posted weekly gains of roughly 9.4% as Capital Economics warned that Iran-backed Houthi militants' seizure of strategic Red Sea islands heightened the risk of prolonged Middle East supply disruptions and threats to critical shipping routes.
Tech Stocks and Oracle Lead the Rebound
Technology shares benefited from Oracle's strong cloud-revenue performance and renewed optimism about artificial-intelligence infrastructure demand, helping drive the Nasdaq's 0.96% gain. Communication services and consumer-discretionary stocks led broader sector gains, rising 1.35% and 1.13% respectively, as nine of 11 major S&P 500 sectors closed in positive territory.
Consumer Confidence Plunges to Historic Lows
The University of Michigan's consumer-sentiment index fell sharply to 47.8 in September from 51.7 at the end of August, approaching historically depressed levels reached earlier in the year. University of Michigan Surveys of Consumers director Joanne Hsu reported that year-ahead inflation expectations surged to 4.6%, driven by consumers' concerns about rising fuel prices and trade tensions threatening household budgets.
Houthi Island Seizure Tightens Red Sea Control
Iran-backed Houthi militants seized the strategic island of Perim and the coastal town of Dhubab near the Bab al-Mandeb strait on Friday morning, consolidating control over one of the world's most critical shipping chokepoints. The waterway handles roughly 10% of global seaborne petroleum; forced rerouting around Africa increases shipping times and freight costs, creating long-term supply-chain pressures.
Capital Economics warned that Houthi territorial gains raise "the risk of greater disruption to Saudi Arabia's oil exports," noting that militants "now appear to be in a better position to strike oil tankers and cause more damage to energy infrastructure." West Texas Intermediate crude ended an eight-session winning streak but still gained 9.4% for the week, reflecting market fears of extended disruption.
Federal Reserve Rate Hike Likely Despite Market Relief
Markets priced in an 86%–90% probability of a 25-basis-point Federal Reserve rate increase at next week's policy meeting, pushing the two-year Treasury yield higher and lifting the 10-year yield to 4.974%—its highest close since October 2023. Bank of America Global Research strategists warned that declining to raise rates after Friday's inflation data and recent Treasury-yield increases would risk "a significant selloff at the long end" of the bond market, leaving policymakers little room to pause.
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