U.S. stocks fell on Friday, but were off their session lows by midsession, after investors reacted to escalating tensions in the Middle East and a U.S. manufacturing activity index plumbing its lowest level since June 2009.
What’s driving the market?
The Dow Jones Industrial Average DJIA, -0.67%[1] was down 167 points, or 0.6%, to 28,701. The S&P 500 SPX, -0.50%[2] fell 14 points, or 0.4%, to 3,244. The Nasdaq Composite COMP, -0.49%[3] slipped 33 points, or 0.4%, to 9,059.
See: Oil prices skyrocket, stock futures sink after top Iranian general killed by U.S. airstrike[4]
The investor flight from risky assets toward traditional safe havens, including gold and U.S. Treasurys, stood in contrast to market action on Thursday, which saw all three major U.S. stock indexes post strong gains to end the first trading session of 2020 at records.
The Dow on Thursday advanced 330.36 points, or 1.2%, to end at 28,868.80, while the S&P 500 rose 27.07 points, or 0.8%, to close at 3,257.85. The Nasdaq Composite jumped 119.58 points, or 1.3%, to end at 9,092.19.
What’s driving the market?
The Pentagon confirmed late Thursday that the U.S. military had killed Qassem Soleimani, the head of Iran’s Islamic Revolutionary Guard’s Quds Force, and said the strike was aimed at deterring future Iranian attacks.
Iran’s supreme leader, Ayatollah Ali Khamenei, declared three days of mourning for Soleimani’s death and said that a “hard revenge awaits criminals.” The prospect of sharp retaliation by Iran could keep market participants unnerved in the coming days and weeks.
President Donald Trump also issued a slew of tweets and said that Soleimani “should have been taken out many years ago.”
Read: Who was Qassem Soleimani, and why is his death a major development in U.S.-Middle East relations?[5]
“The initial reaction will lead to a risk-off for equity markets and upward pressure on oil prices,” Steven Chiavarone, portfolio manager at Federated Investors, told MarketWatch. “But what we don’t know is the timing and severity of Iran’s expected reaction.”
Chiavarone said the traditional playbook for investors was to look past such jitters unless it appeared to impede global economic growth. More important to the bull market’s momentum was the direction of growth, how much stimulus central banks provided, and if trade tensions continued to wane with the forging of the phase one tariff deal between the U.S. and China, he said.
Worse-than-expected U.S. manufacturing data[6] underlined...