By Stephen Culp and Tharuniyaa Lakshmi
NEW YORK, Oct 8 (Reuters) – U.S. stocks plunged on Thursday as crude prices jumped following rising tensions in the Middle East and a cut in U.S. production that fueled fears of inflation and rising rates, while semiconductor stocks slumped.
Among major U.S. stock indexes, the Nasdaq closed with the largest percentage loss, two days after the tech-heavy index hit a record closing high. The S&P 500’s loss was more modest, while the Dow Jones posted a nominal gain.
Chipmakers, which have soared more than 80% so far this year, clearly underperformed on the day, falling 3.4% following a Financial Times report that OpenAI’s annualized revenue was $20 billion lower than the company had previously reported.
“The market is moving sideways in anticipation of the third-quarter earnings season, which begins next week, and then there is the ongoing conflict in Iran that is driving up oil prices,” said Terry Sandven, chief equity strategist at US Bank Wealth Management in Minneapolis, Minnesota. “What’s equally telling is that since the start of the year, the path of least resistance for stocks has been upward.”
Oil prices surged due to supply problems after a series of attacks on shipping in the Strait of Hormuz, combined with a reduction in U.S. production due to hurricane activity.
Front-month WTI and Brent rose 3.6% and 4.1%, respectively.
Tighter global crude supplies during the Iran war have sent U.S. crude up more than 60% so far this year, stoking inflationary pressures. In response to these pressures, the US Federal Reserve raised interest rates in September for the first time since July 2023.
Financial markets currently expect the central bank to leave rates unchanged this month, while the probability of a hike in December is 69.2%, according to the CME’s FedWatch tool.
This reflects the rate hike path expected by the European Central Bank, and was confirmed by Fed Governor Christopher Waller, who said additional rate hikes would likely be “necessary, but the timing of those hikes is “flexible.”
The Dow Jones Industrial Average rose 51.77 points, or 0.10%, to 51,231.64, the S&P 500 lost 36.41 points, or 0.47%, to 7,765.36 and the Nasdaq Composite lost 345.35 points, or 1.25%, to 27,193.34.
Among the 11 major sectors in the S&P 500, energy stocks were the biggest gainers on a percentage basis, while technology, dominated by chips, suffered the biggest loss.
Memory chip giant Samsung Electronics’ forecast for record quarterly profits failed to restore confidence, with its shares closing lower in South Korea. Rival Micron Technology fell 4.8%.
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