Brent jumps 3.1% to $116.72 as Dow Jones falls 1.2%
Key Facts
The Dow Jones fell 1.2% in Friday’s session, October 23, while the Nasdaq Composite slipped 0.2% and the S&P 500 declined 0.5%, recording its second consecutive weekly loss. Stocks fell as another jump in oil prices fueled concerns about supply disruptions and higher energy costs. Brent crude settled at $116.72 a barrel, up 3.1% for the session, reaching its highest level since June 2022. The crude benchmark had risen from below $97 a barrel at the start of October. In the bond market, the 10-year U.S. Treasury yield rose to 4.99% from 4.96% late Thursday.
Crude’s rise was linked to concerns that Middle East supply disruptions could widen, after Houthi attacks in Saudi Arabia raised fears of further supply disruptions. Reuters reported that UAE authorities had also reported an oil spill, amid escalating risks to energy flows from the region. The Associated Press said the U.S. war with Iran had sharply reduced global oil supplies, adding that Houthi attacks had heightened market concerns about further disruptions. The concerns accompanied weekly gains in both major crude benchmarks: Brent ended the week up 6%, while West Texas Intermediate rose 2.3%. On Friday, WTI settled at $103.27 a barrel, up $3.80, or 3.8%.
The decline spread across much of the market, with nearly three-quarters of S&P 500 stocks falling in Friday’s session. But higher oil prices supported energy shares; the S&P 500 energy sector climbed 2.5% to a record, while the semiconductor index rose 0.4%. AI-related companies also gained, with Micron up 2.5%, Intel up 1.7%, Microsoft up 0.7% and AMD up 1.7%. The Associated Press said higher oil prices weighed on most of the market but supported energy companies. The gains in these shares reflected the session’s split, with oil-related concerns weighing on indexes while demand for some technology and energy companies continued.
Alongside oil, strategist Angelo Kourkafas said investors were focused on the economics of artificial intelligence, particularly the large upfront infrastructure costs required to build it. He added that the timing of returns on this spending remained unclear, putting the cost of investment and how quickly it translates into returns in focus for investors. Kourkafas said: "Investors seem to be increasingly focused on the economics of AI, particularly the large upfront costs required to build AI infrastructure." This came in a session when most stocks in the broader U.S. index fell, despite gains in several AI-related technology shares. The rise in the 10-year Treasury yield, from 4.96% to 4.99%, also added to the weight of simultaneous moves in equity and fixed-income markets.
Attention now turns to the Federal Open Market Committee meeting on October 27 and 28, with an interest-rate decision due after the meeting. The Associated Press said markets expected rates to remain unchanged at the next meeting, after the Federal Reserve raised them at its previous meeting. The following day, the September personal income and personal spending report, including the personal consumption expenditures price index, is due on October 29 at 8:30 a.m. The report follows a session that combined rising oil prices and yields with declines in the major indexes, putting inflation data in focus ahead of the Fed’s decision. Investors are also awaiting earnings next week from about one-third of S&P 500 companies, including Alphabet, Microsoft and Amazon.