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Nasdaq Edges Closer to Correction
The Nasdaq Composite, already under pressure, moved closer to correction territory. It fell 1.33% on Friday, following a 2.4% drop Thursday, putting it down nearly 11% from its late October peak. Analysts attribute this to diminishing investor optimism and a worsening economic outlook. Uncertainty surrounding artificial intelligence's role in the tech sector also adds to the uncertainty.
Geopolitical Tensions Escalate
President Trump's decision to extend Iran's deadline for reopening the Strait of Hormuz did little to calm global market concerns. Iran's Revolutionary Guard Corps maintained its defiant stance, vowing to disrupt shipping in the key waterway. This geopolitical instability fueled a surge in oil prices. Brent crude futures climbed 2.36% to $110.55 a barrel, while U.S. West Texas Intermediate futures rose 3.56% to $97.84. "Words alone aren’t cutting it right now," noted Matt Britzman, senior equity analyst at Hargreaves Lansdown. "Tangible evidence of progress is what’s needed."
European and Asian Markets Follow
The global unease was evident across continents. The pan-European Stoxx 600 index dropped 1%, with Germany's Dax down 1.4% and London's FTSE 100 shedding 0.3%. In Asia, MSCI's index of shares excluding Japan fell 0.8% overnight, adding to a wider decline in global stocks which dropped 0.93% overall.
Bond Yields Spike on Inflation Worries
Investors worried about a potential inflationary shock. This concern is leading money markets to expect a higher chance of interest rate hikes by the U.S. Federal Reserve. The 10-year U.S. Treasury yield rose over 2 basis points to 4.4398%, its highest since July. Money markets now assign a roughly 60% chance of a Fed rate increase this year, a stark reversal from earlier expectations of cuts. Germany's 10-year bond yield also reached a multi-year high of 3.13%.
Currency Markets Show Slight Dollar Strength
The U.S. dollar found modest strength against major peers, including the Japanese yen and Swiss franc, reflecting cautious global sentiment. The dollar index, tracking the greenback against six other currencies, saw its fourth consecutive session of gains.