By Sinéad Carew and Harry Robertson
NEW YORK/LONDON, March 6 (Reuters) – Stocks sank on Friday as the U.S.-Israeli war against Iran sent oil futures soaring to prices not seen since 2023 while an unexpected loss of U.S. jobs in February increased hopes for Federal Reserve rate cuts but did little to cheer investors worried about economic weakness.
Trading was choppy in currencies and U.S. Treasuries as investors digested the Labor Department’s Bureau of Labor Statistics report showing that nonfarm payrolls fell by 92,000 jobs last month, versus economists’ forecast for growth of 59,000.
February’s loss contrasted with a downwardly revised increase of 126,000 in January. The unemployment rate rose to 4.4% from January’s 4.3%.
Meanwhile, Israel pounded the Lebanese capital Beirut on Friday after ordering an unprecedented evacuation of the entire southern suburbs of the city, in a major expansion of the Middle East war.
Adding to worries over the conflict, U.S. President Donald Trump demanded Iran’s “unconditional surrender” in a dramatic escalation of rhetoric a week into the war he launched alongside Israel. Qatar’s energy minister told the Financial Times that his country expects all Gulf energy producers to shut down exports within weeks, which would push oil prices up to $150 a barrel.
Oil prices rallied sharply, with U.S. crude oil futures climbing more than 14% at one point during Friday’s trading. That pulled U.S. oil prices up closer to the price of Brent, the international benchmark, as buyers sought available barrels, with Middle Eastern supply constrained by the effective closure of the Strait of Hormuz.
At settlement, U.S. crude was up 12.21%, or $9.89, at $90.90 per barrel, for its biggest one-day gain since 2020, during the COVID-19 pandemic. Its intraday peak was the highest since September 2023. Brent settled at $92.69 per barrel, up 8.52%, or $7.28, on the day, after touching its highest price since September 2023.
With oil prices fanning inflation worries and signs of a weak U.S. labor market, investors sold off equities into the late afternoon.
“Stocks have been under pressure all day on the heels of the Qatar comments and the weak February jobs report,” said Sahak Manuelian, managing director for global equities trading at Wedbush Securities in Pasadena, California.
At 02:38 p.m. the Dow Jones Industrial Average fell 488.20 points, or 1.02%, to 47,466.54, the S&P 500 fell 72.36 points, or 1.06%, to 6,758.35 and the Nasdaq Composite fell 252.42 points, or 1.10%, to 22,497.62.
MSCI’s gauge of stocks across the globe fell 8.49 points, or 0.83%, to 1,019.64. Earlier, the pan-European STOXX 600 finished down 1.02% for the day. The index marked its biggest weekly loss in almost a year with a decline of 5.5%.
“We’ve seen negative momentum in stocks in recent days on the geopolitical environment and concerns about a resurgence in inflation and rising oil prices,” said Jim Baird, chief investment officer with Plante Moran Financial Advisors.
“Today you layer on the news of an unexpectedly soft labor market report for February. Investors are recalibrating their expectations, not only for stocks but what it will mean for the Fed.”
In currencies, the safe-haven Swiss franc rallied across the board on Friday, as escalation in the Middle East spurred a flight to safety, while the U.S. dollar gave up earlier gains in choppy trading after the weak jobs report.
Against the Swiss franc, the dollar weakened 0.49% to 0.777 while the euro slid 0.52% to 0.9016 franc
.
The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, fell 0.09% to 98.96, with the euro down 0.03% at $1.1603.
Against the Japanese yen, the dollar strengthened 0.15% to 157.81.
In cryptocurrencies, bitcoin fell 4.19% to $68,164.24. Ethereum declined 4.53% to $1,986.37.
In government bonds, trading was choppy as investors worried about how the Federal Reserve would navigate a combination of slowing jobs and high inflation. By late afternoon the yield on benchmark U.S. 10-year notes was down 2.5 basis points at 4.121%, from 4.146% late on Thursday.
The 30-year bond yield fell 0.3 basis points to 4.7498% while the two-year note yield, which typically moves in step with interest rate expectations for the Federal Reserve, fell 5.7 basis points to 3.542%, from 3.599% late on Thursday.
Traders are betting that the Fed’s first rate cuts will be in July but the probability they stay unchanged in June fell to around 52% from Thursday’s 66.7%, according to CBOE’s FedWatch tool.
“The Fed finds themselves in a tricky spot. Inflation is still elevated and now, with oil prices surging, it’s going to create even more upward pressure there. At the same time you’re seeing the economy lose some momentum. There’s obviously pervasive uncertainty on a number of fronts both policy and geopolitically related,” said Baird.
Gold rose on Friday after the softer U.S. payrolls data kept hopes for rate cuts alive, though after two daily losses earlier in the week it was on track for its first weekly decline in five weeks.
Spot gold rose 1.64% to $5,159.74 an ounce. U.S. gold futures rose 1.43% to $5,137.50 an ounce. Spot silver rose 2.64% to $84.34 an ounce.
(Reporting by Sinéad Carew, Harry Robertson; Editing by Kate Mayberry, Alex Richardson, Jan Harvey, Nia Williams and Edmund Klamann)
