US markets managed to close slightly above the flatline on Wednesday, with major indices making marginal gains despite mounting geopolitical tensions in the Middle East. The Dow Jones Industrial Average gained, while the S&P 500 and Nasdaq also posted narrow increases. Investors were cautious as Israel’s ongoing conflict with Hezbollah and rising tensions with Iran caused a risk-off sentiment, particularly in the tech and retail sectors. However, energy stocks continued to rally, driven by surging oil prices following fears of potential supply disruptions. With the ADP private payrolls report showing stronger-than-expected job growth ahead of Friday’s nonfarm payrolls, markets remain in a delicate balance as geopolitical uncertainty and economic data weigh on sentiment.

Key Takeaways:

  • Dow Posts Marginal Gain: The Dow Jones Industrial Average inched up by 39.55 points, or 0.09%, closing at 42,196.52. Despite rising geopolitical tensions in the Middle East, the Dow managed make a narrow gain as investor sentiment remained cautious. 
  • S&P 500 and Nasdaq Inch Up: The S&P 500 gained a mere 0.01%, ending the session at 5,709.54, while the Nasdaq Composite climbed 0.08% to close at 17,925.12. Both indices saw limited upside as geopolitical risks in the Middle East curbed risk appetite. However, technology stocks like Nvidia, which rose 1.6%, helped lift the Nasdaq, while the S&P 500 found support from energy stocks. 
  • Oil Sector Rallies on Middle East Tensions: Oil stocks outperformed, with the Energy Select Sector SPDR Fund (XLE) rising 1%, marking its fourth consecutive day of gains. West Texas Intermediate crude prices climbed by 1.56% to $70.92 per barrel, while Brent crude rose 1.44% to settle at $74.64 per barrel. Both benchmarks surged on fears of supply disruptions amid the escalating conflict in the Middle East. Israel’s ongoing offensive in Lebanon and heightened tensions with Iran have raised concerns about potential retaliatory attacks on oil infrastructure in the region.
  • ADP Data Exceeds Expectations: US private payrolls increased by 143,000 jobs in September, surpassing economists’ expectations of 120,000. This stronger-than-anticipated labour market report comes ahead of Friday’s key nonfarm payrolls report, which will provide further insight into the Federal Reserve’s next steps regarding interest rates. The ADP data highlights the resilience of the US labour market, even as broader economic uncertainties and concerns about a slowdown persist.
  • European Markets Mixed Amid Middle East Tensions: European stocks delivered a mixed performance as investors weighed the ongoing conflict in the Middle East. The FTSE 100 added 0.17%, closing at 8,290.86, while the CAC 40 rose by 0.1% to 7,578. The gains in these indices were largely driven by oil-related stocks, with TotalEnergies surging 2.2% on rising oil prices. The luxury sector also showed some recovery, with LVMH and Hermès posting gains. However, utilities across Europe struggled, with the sector dropping 1.8% amid broader market uncertainty.
  • Asian Markets Surge on Stimulus Optimism: Asian markets rallied on Wednesday, with Hong Kong’s Hang Seng Index soaring 6.2% to close at 21,133.68, marking its highest level in 22 months. The gains were driven by optimism surrounding Beijing’s latest stimulus measures aimed at boosting the property sector. China Vanke led the charge, surging by 61%, while other major property developers like Logan Group saw gains of 30%. Mainland Chinese tech giants, including JD.com and Baidu, also posted significant gains, up over 9% each. Markets across mainland China remained closed for the Golden Week holiday, while Australia’s S&P/ASX 200 fell 0.13% and Japan’s Nikkei 225 dropped 2.18%, reflecting regional caution amid global tensions.
  • Treasury Yields Rise: US Treasury yields ticked higher on Wednesday, with the 10-year yield adding 4 basis points to 3.783%, while the 2-year yield edged up by less than 2 basis points to 3.637%. Investors were focused on the upcoming US nonfarm payroll report, which could play a pivotal role in determining the Federal Reserve’s next moves regarding interest rates.

FX Today:

  • EUR/USD Holds Below 1.1100 as Markets Await US Jobs Data: EUR/USD consolidated near 1.1042 on Wednesday, as geopolitical concerns from the Middle East and anticipation for Friday’s US nonfarm payrolls report kept traders cautious. The pair struggled to break above the 1.1100 level, with immediate support seen at 1.1040, where the 100-period SMA lies. A break below this level could push the pair further down toward the 200-period SMA at 1.1000. On the upside, resistance is expected at 1.1136, the 50-period SMA, and a close above this could signal renewed bullish momentum.
  • GBP/USD Retreats as Dollar Strengthens: GBP/USD pulled back to 1.3267 after failing to sustain a break above the 1.3400 level. The pair continues to trade within a bullish trend but faced resistance around recent highs. Support is currently seen at the 100-period SMA at 1.3256, with further downside pressure possible toward the 1.3200 level if selling intensifies. On the upside, a push above 1.3300 would set the pair back on track to test the 1.3400 resistance level.
  • USD/CHF Struggles Near Multi-Month Lows: The USD/CHF pair traded near 0.8495 on Wednesday, holding just above its multi-month lows as the dollar remained subdued. The pair found support around the 200-period SMA at 0.8485, but upside momentum remained weak. Key resistance lies at the 100-period SMA at 0.8477, and any break above could trigger a move toward the 0.8500 level. Without a strong break of these resistance levels, the pair is likely to remain under downward pressure, with immediate support seen at 0.8470.
  • AUD/USD Consolidates Below 0.6900: AUD/USD hovered around 0.6883 on Wednesday, struggling to break above the 0.6900 mark as geopolitical risks and mixed economic data weighed on sentiment. The pair is currently consolidating after recent gains, with immediate support at the 100-period SMA at 0.6803. Stronger support lies at the 200-period SMA at 0.6772, and a break below this level could shift the bias toward the downside. On the upside, a sustained move above 0.6900 is required to signal a resumption of the bullish trend.
  • Gold Eases After Middle East Conflict Pauses: Gold prices retreated slightly on Wednesday, dropping 0.50% to trade at $2,656. Despite earlier gains driven by geopolitical uncertainty, the precious metal faced resistance near $2,660, where the 50-period SMA stands. As concerns about immediate escalation in the Middle East eased, traders locked in profits, pushing prices down. However, strong support remains at $2,640 (50-period SMA), with further downside protection at $2,605 (100-period SMA). Gold remains in a bullish trend as long as it stays above $2,600, with potential for further gains toward $2,700 if geopolitical tensions reignite.

Market Movers:

  • Nike Drops on Full-Year Guidance Withdrawal: Nike shares plunged 6.8% after the company unexpectedly withdrew its full-year guidance ahead of an upcoming CEO change. Despite reporting better-than-expected fiscal first-quarter earnings and revenue, the stock suffered as investors reacted to the uncertainty surrounding its leadership transition. Nike’s decision to postpone its investor day, initially scheduled for November, added to the market’s negative sentiment, dragging the retail sector lower.
  • Tesla Declines After Missing Delivery Targets: Tesla shares fell 3.5% following the release of its third-quarter delivery numbers, which came in at 462,890, just shy of analyst expectations of 463,310. Although the miss was minor, it raised concerns about the company’s future demand, contributing to the broader weakness in the technology sector
  • JD Sports Slips Despite Strong Earnings: JD Sports shares fell 6%, despite the company reporting better-than-expected revenues and profits for the first half of the fiscal year. The drop followed Nike’s earnings miss and subsequent stock decline, which weighed on JD Sports as a major distributor of Nike products. The broader retail sector struggled, reflecting investor concerns over demand in the wake of growing global uncertainty.
  • Harley-Davidson Falls on Analyst Downgrade: Harley-Davidson shares dropped 4.1% after Baird downgraded the motorcycle maker from “Buy” to “Neutral.” The downgrade came on the back of concerns about weak retail activity, excess inventory, and caustic dealer sentiment. Analysts expressed doubt over Harley-Davidson’s ability to meet its third-quarter forecast, which further pressured the stock.
  • Conagra Brands Sinks on Disappointing Results: Conagra Brands shares plunged 8% after the packaged foods company reported fiscal first-quarter earnings that missed analyst expectations by 7 cents. The company posted revenue of $2.79 billion, falling short of the forecasted $2.84 billion. The earnings miss and weaker-than-expected revenue created investor concerns about the company’s future growth amid ongoing inflationary pressures.
  • Lamb Weston Rises on Earnings Beat: Lamb Weston shares rose more than 2% after the company reported fiscal first-quarter earnings of 73 cents per share, surpassing analyst estimates of 72 cents. Revenue came in at $1.65 billion, also beating expectations of $1.56 billion. Despite soft demand, Lamb Weston’s announcement of spending cuts to improve cash flow helped lift investor sentiment, driving the stock higher.

As the day closed, markets reflected a cautious tone amid rising geopolitical tensions and mixed economic data. The Dow made a small gain, while the S&P 500 and Nasdaq saw marginal increases, supported by strong performances in energy stocks as oil prices surged on Middle East conflict fears. However, sectors like retail and technology struggled, with notable declines in Nike and Tesla weighing on broader sentiment. Investors remain on edge, closely watching the upcoming US nonfarm payroll report, which is expected to significantly influence the Federal Reserve’s next move on interest rates. With uncertainty looming over both economic and geopolitical fronts, market volatility is likely to persist in the days ahead.