Markets fall, pressured by higher interest rates and rising oil prices

Dow retreated 398, decliners over advancers better 3-1 & NAZ gave back 213.  The MLP index slid 1 to the 288s & the REIT index fell 3+ to the 424s.  Junk bond funds edged lower & Treasuries had more selling, bringing higher yields.  Oil jumped about 3 to the 77s & gold was off 7 to 2660 (more on both below).

Dow Jones Industrials 

Super Micro (SMCI) shares jumped after the computer server company said it's shipping more than 100K graphics processing units used for artificial intelligence per qtr.  That could translate into several Bs of $s of orders if the average price of a GPU is around the cost of NVDA's $30K chip.  The GPU figure was revealed in an announcement about a new cooling product unveiled by SMCI.  As 1 of the biggest beneficiaries of the AI boom, SMCI makes computers that companies use as servers for data storage, websites, AI training models & more.  The company said its new cooling product will allow data centers to spend less on hardware costs & cooling infrastructure for servers that typically need to be running constantly.  MCI also said it recently deployed more than 100K GPUs with liquid cooling solution “for some of the largest AI factories ever built,” as well as other cloud service providers.  While the announcement was cheered, SMCI is about 9 weeks behind in reporting its annual report, which was expected in Aug.  The company said late that month that management needed additional time “to complete its assessment of the design and operating effectiveness of its internal controls over financial reporting as of June 30, 2024.”  Even after today's rally, the stock is down by well over 50% since peaking in Mar.  Shares fell 12% on Sep 26, after a report said the Dept of Justice opened a probe into the company following a report from short-seller Hindenburg Research in which the firm alleged it identified “fresh evidence of accounting manipulation.”shares jumped 15% after the computer server company said it’s shipping more than 100K graphics processing units used for artificial intelligence per qtr.  SMCI stock jumped 6.51 (16%).

Super Micro shares soar after server company says it’s shipping over 100,000 AI GPUs per quarter

Oil prices have surged over the last week amid rising tensions in the Middle East, which have markets bracing for a potential rise to $100 a barrel.  Prices rose about 9% last week & traders in the options market for oil showed record interest in call options for $100 a barrel oil in Nov, while $100 call options for Dec were at their highest level since Sep 20.  Call options give traders the right to buy oil futures contracts at that price, though they aren't obligated to do so.  This comes after Iran launched a massive ballistic missile attack on Israel last week, which the Israeli gov has vowed retaliation for.  That has raised concerns about a broader conflict in the Middle East involving Iran, which has aided its proxies Hamas & Hezbollah in their war with Israel, as well as the Houthis in Yemen, who have attacked shipping in the Red Sea & Gulf of Aden.  "We've seen one of the biggest jumps in oil price volatility in over two years," said Phil Flynn, senior account exec & market analyst at the Price Futures Group.  "This is a market that seemed to be immune to geopolitical risk factors, they seemed to ignore them and you had hedge funds driving prices lower time and time again. And now this is a wake-up call because this is getting real."  Flynn said the rising geopolitical tensions has traders in the energy market increasingly hedging against the prospect of oil surging to $100 a barrel.

Oil prices rise as tensions escalate in Middle East

Milton rapidly strengthened into a Category 5 hurricane today in the Gulf of Mexico on a path toward Florida, threatening a dangerous storm surge in Tampa Bay, leading to evacuation orders & long gas lines, & lending more urgency to the cleanup from Hurricane Helene, which swamped the same stretch of coastline less than 2 weeks ago.  A hurricane warning was issued for parts of Mexico's Yucatan state, which expected to get sideswiped, & much of Florida’s west coast was under hurricane & storm surge watches.  Florida's Lake Okeechobee, which often floods during intense storms, was also under a hurricane watch.  “This is the real deal here with Milton,” Tampa Mayor Jane Castor said.  “If you want to take on Mother Nature, she wins 100% of the time.”  The compact Milton intensified quickly today & was expected to become a large hurricane over the eastern Gulf.  It had maximum sustained winds of 160 mph, the National Hurricane Center said.  The storm’s center was about 130 miles west-northwest of Progreso, Mexico, & about 720 miles southwest of Tampa.  Its center could come ashore Wed in the Tampa Bay area, & it could remain a hurricane as it moves across central Florida toward the Atlantic Ocean.  That would largely spare other states ravaged by Helene, which killed at least 230 people on its path from Florida to the Appalachian Mountains.  Forecasters warned of a possible 8- to 12-foot storm surge in Tampa Bay & said flash & river flooding could result from 5-10 inches  of rain in mainland Florida & the Keys, with as much as 15 inches in places.  The Tampa Bay area is still rebounding from Helene & its powerful surge.  12 people died, with the worst damage along a string of barrier islands from St Petersburg to Clearwater.  Florida Gov Ron DeSantis said that it was imperative that messes from Helene be cleared ahead of Milton's arrival so they don't become projectiles.  More than 300 vehicles picked up debris yesterday but encountered a locked landfill gate when they tried to drop it off.  State troopers used a rope tied to a pickup truck & busted it open, DeSantis added.

Hurricane Milton is a Category 5. Florida orders evacuations and scrambles to clear Helene’s debris

Gold prices eased as the $ held strong $ recent employment data prompted investors to scale back expectations of a big rate cut from the Federal Reserve in Nov.  Spot gold fell 0.2% to $2648 per ounce, off a record peak of $2685 hit on Sep 26.  US gold futures settled 0.1% lower at $2666.  The US $ , hovered at its highest level in 7 weeks, making greenback-priced bullion more expensive for other currency holders.  Bullion is considered a hedge against geopolitical & economic uncertainties & tends to thrive in a low interest rate environment.  Traders now see an 86% probability that the Fed will cut rates by only a qtr of a percentage point next month after a US employment report last week reinforced the belief the economy is unlikely to need the Fed to deliver large interest rate cuts for the rest of this year.  The market will now scan thru minutes of the Fed's last policy meeting, & the US Consumer Price Index (CPI) & Producer Price Index (PPI) data this week.  Elsewhere, China's central bank held back on buying gold for its reserves for a 5th straight month in Sep.

Gold Retreats on Strong Dollar, Fading Hopes of Big US Rate Cut

Brent crude soared above $80 a barrel, its highest price since Aug, as mounting tensions in the Middle East raised speculation that Israel may attack Iran's oil infrastructure.  The global benchmark's 3.7% rally extends a surge from last week, which was driven by speculation about how Israel may respond to Iran's missile attack tomorrow.  Pres Biden said Fri that he didn't know when an Israeli response would come, & "I'd be thinking about other alternatives than striking oil fields."  US benchmark West Texas Intermediate crude also climbed 3.7%, topping $77 a barrel.  The Middle East remains on edge, with Hamas firing a barrage of rockets toward Tel Aviv & Israel sending troops back into northern Gaza over the weekend while also keeping up aerial attacks & limited ground maneuvers in Lebanon.  Iran's oil output has returned to almost full capacity & could be vulnerable as tensions escalate.  Brent posted its biggest weekly gain since Jan 2023 last week on the heightened tensions in a region that accounts for about a 3rd of global crude supply.  The rally marks a stark reversal in mood after prices slumped in the 3rd qtr on concerns about the supply & demand outlook for next year.  Brent for Dec settlement rose 3.7% to settle at $80.93 a barrel & WTI for Nov climbed 3.7% to end the session at $77.14 a barrel.

Brent Oil Surges to $80 as War Risk Keeps Investors on Edge

The stock market ahead of a week of key inflation data & the start of earnings season.  Oil futures climbed more than 3.5%, extending their biggest weekly gains in over a year as traders price in whether Israel's expected response to Iran's recent attack will involve targeting the country's petroleum fields.  Meanwhile Hurricane Milton's upgrade to Category 5 status off the Gulf of Mexico also helped fuel higher crude prices & insurance stocks fell as the storm headed toward the coast of Florida.  These are trying times for nervous investors with higher interest rates & oil prices.