Wall St slips as Middle East uncertainty lifts oil; Trump-Xi talks in focus

On Thursday, Wall Street’s major indexes declined as tensions surrounding the Middle East conflict drove up oil prices and Treasury yields, dampening risk appetite prior to a crucial US-China summit. At the UN General Assembly, US and Iranian leaders engaged in verbal sparring, prompting Brent crude prices to surge to above $100 a barrel.

A proposed ban on US diesel exports further fueled investor wariness. Technology shares were among the biggest decliners in the S&P 500, with chipmakers like Nvidia, Broadcom, and Micron falling more than 1% each. Oracle experienced a 5.5% drop after reportedly sending a 'force majeure' notice to a data center in New Mexico. Shares in Blue Owl, the company responsible for the project, slipped by 5%.

Treasury yields, especially on the 30-year bond, reached their highest level since 2004, exerting downward pressure on riskier assets as the market anticipated an extended conflict and higher borrowing costs. Despite the mixed market sentiment, AI-related stocks continued to support tech-heavy indexes, helping the Nasdaq reach new highs earlier in the week.

At 9:48 a.m. ET, the Dow Jones Industrial Average slipped 208.36 points, or 0.40%, to 51,303.23; the S&P 500 fell 24.04 points, or 0.30%, to 7,681.99; and the Nasdaq Composite dropped 159.54 points, or 0.58%, to 26,778.64. Six out of the 11 sectors on the S&P 500 were trading lower, while the energy sector gained 1%. The CBOE Volatility Index, a barometer of market fear, hit a one-week high of 15.7 points.

The focus will now shift to the upcoming US-China summit, where investors are expected to discuss AI regulation, the Middle East situation, and Taiwan. Representatives from major US corporations are also scheduled to meet with President Trump and Chinese President Xi. Treasury Secretary Scott Bessent revealed that the two global powers have extended their ceasefire until January 10.

Higher energy costs and robust economic data have led investors to anticipate additional interest rate hikes by the Federal Reserve, with a 71% probability of a 25-basis-point increase next month, up from roughly 50% a day earlier, according to the CME Group’s FedWatch Tool. New York Federal Reserve President John Williams echoed these expectations, suggesting that rate hikes may be necessary throughout the year.

Weekly jobless claims declined, indicating a strengthening labor market. Meta Platforms, which recently unveiled its Muse AI agent, launched Charm, a portable device for utilizing the technology, and its shares increased by 1.1%. Among other noteworthy performances, MGM Resorts plummeted 10% following the withdrawal of Barry Diller's People Inc. proposal to acquire the casino operator.

On the NYSE, declining stocks outnumbered advancing ones by a ratio of 1.84-to-1, and on the Nasdaq, the figure stood at 1.73-to-1. The S&P 500 recorded seven new 52-week highs and 20 new lows, while the Nasdaq Composite achieved 17 new highs and 103 new lows.