Dow closes in correction, S&P logs longest weekly losing streak in four years and oil settles at Iran-war highs
By John Towfighi, CNN
New York (CNN) — US stocks slid and the Dow closed in correction Friday as uncertainty about the duration of the war with Iran and nerves about energy inflation continued to weigh on markets.
The Dow fell 793 points, or 1.73%, and closed at 45,167, down 10% from its peak above 50,000 in February.
The S&P 500 fell 1.67% and the Nasdaq declined by 2.15%. The Dow, S&P 500 and Nasdaq each closed at their lowest level since August.
The Nasdaq extended losses after closing in correction territory Thursday. The index on Friday closed down more than 12.5% from its record high in October. The Nasdaq is made up of tech stocks that are more sensitive to the outlook for interest rates and economic growth.
The key factor is rising oil prices, which settled on Friday at their highest level since the war began. Oil prices climbed as investors grew skeptical of efforts to end the war.
Brent crude, the global benchmark, rose 4.22%, to $112.57 per barrel. US crude oil rose 5.46%, to settle at $99.64 per barrel, after briefly hitting $100 per barrel.
“The diplomatic dissonance this week between the US and Iran dismayed investors,” Doug Beath, global equity strategist at Wells Fargo Investment Institute, said in a note.
The S&P 500 dropped 3.4% across two days, suffering its worst two-day drop since April, when markets were rocked by uncertainty about tariffs.
Treasury yields, which rise when bonds fall, moved higher before paring gains. The 10-year yield hit 4.48%, its highest level since July, before trading around 4.43%. The 30-year yield briefly hit 5%, a key threshold, before trading at 4.97%.
Yields have climbed during the war on Iran as investors adjust their expectations for inflation and interest rates remaining higher for longer. The 10-year yield traded at 3.96% at the end of February, before the start of the conflict in the Middle East.
The US dollar index gained 0.2%, benefitting from safe haven demand and expectations for the Federal Reserve to hold interest rates steady due to inflation concerns.
“The stock market is still highly correlated to oil prices, so as oil prices move higher, stocks are moving lower,” Glen Smith, chief investment officer at GDS Wealth Management, said in a note.
Higher bond yields can also pull investors away from stocks.
The Dow and S&P 500 have dropped for five weeks in a row, posting their worst streak of consecutive weekly losses in almost four years.
“It’s not surprising for the Nasdaq to be entering correction territory sooner than the broader S&P 500, as the tech sector was facing pressure even before the Iran war began on worries about high valuations in the space and questions about AI’s return on investment,” Smith said.
CNN’s Fear and Greed index hovered in “extreme fear” and hit its lowest level since November. Meanwhile, bitcoin had a rough day: The cryptocurrency dropped 3.6%, trading around $66,000.
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