U.S. stock markets experienced a notable downturn on Thursday, reversing much of the gains made in the previous session. Investor sentiment was shaken by concerns surrounding private credit providers and escalating geopolitical tensions between the United States and Iran. These issues, coupled with a mix of economic data, led to negative performances across all three major stock indexes.
### How Did The Benchmarks Perform?
The Dow Jones Industrial Average (DJI) fell sharply by 0.5%, equating to a loss of 267.50 points, closing at 49,395.16. Out of the 30 components that make up this index, only 12 managed to finish in positive territory, highlighting the struggle of the market. In a similar vein, the tech-heavy Nasdaq Composite ended the day at 22,682.73, showing a slight dip of 0.3%, pressured largely by disappointing earnings from key software companies.
The S&P 500 also faced challenges, dropping 0.2% to close at 6,861.89. Interestingly, despite the downturn, seven of the 11 sectors within this broad-market index performed positively, while four sectors slipped into the red. The Energy Select Sector SPDR (XLE) and Technology Select Sector SPDR (XLK) posted gains of 1.9% and 1%, respectively. In contrast, the Utilities Select Sector SPDR (XLU) and Real Estate Select Sector SPDR (XLRE) experienced declines of 1.7% and 1.3%.
Investor anxiety was further illustrated by the CBOE Volatility Index (VIX), which rose by 3.1% to 20.23. Trading volume was also lower than average, with 16.4 billion shares changing hands on Thursday compared to the last 20-session average of 20.5 billion. The S&P 500 recorded 27 new 52-week highs and six new lows, while the Nasdaq Composite noted 62 new highs and a considerably larger 146 new lows.
### Concerns Over Private Credit
Adding to market anxiety were turbulent events in the private credit sector. Blue Owl Capital Inc. made headlines after selling off $1.4 billion in loan assets. This move resulted in a tightening of liquidity within its retail-focused fund, which subsequently led to a halt on private credit fund redemptions. The ramifications were significant, as investors reacted by offloading shares of Blue Owl Capital, alongside other major players like Blackstone Inc. and Apollo Global Management Inc., which saw their stock prices decline by 5.9%, 5.3%, and 5.2% respectively.
Both Blackstone and Apollo Global are currently rated as Zacks Rank #3 (Hold), indicating a cautious outlook on their future performance amid these unfolding events.
### U.S.-Iran Geopolitical Conflicts
The geopolitical landscape, particularly the situation involving the United States and Iran, also influenced market movements. Tensions escalated significantly following disagreements regarding Iran’s nuclear program. Notably, President Donald Trump hinted at the possibility of a military strike against Iran within the next ten days, prompting a sharp rise in crude oil prices, which surged by around 2%. This volatile geopolitical climate has far-reaching implications for market stability and investor sentiment.
### Economic Data
Amidst the market’s multifaceted challenges, economic data released by the Department of Labor provided a mixed picture. Initial jobless claims decreased by 23,000, landing at 206,000 for the week ending February 14, which was better than the anticipated figure of 221,000. On the flip side, continuing claims, which indicate individuals already receiving assistance, ticked up by 17,000 to 1.869 million for the week ending February 7.
The trade deficit, a critical metric, ballooned to $70.3 billion in December, significantly exceeding expectations of $58.4 billion. Revisions of prior months indicated a downward adjustment from $56.8 billion to $53 billion in November, further highlighting growing trade imbalances.
Additionally, the Philadelphia Fed Index reported a score of 16.3, surpassing both the Zacks Consensus Estimate of 10 and January’s reading of 12.6. However, other sectors showed signs of stress; the National Association of REALTORS reported a modest decline of 0.8% in pending home sales from the previous month and a 0.4% year-over-year decrease.
Lastly, U.S. commercial crude oil inventories saw a substantial decline, decreasing by 9.0 million barrels from the previous week, while Leading Indicators reflected a slight decline of 0.2% from the previous month, aligning with preliminary estimates.
