Dow futures slipped on Tuesday as a stronger-than-expected August jobs report and renewed U.S.-Iran hostilities lifted expectations for a Federal Reserve rate increase and pushed Brent crude above $99 a barrel.
Benchmark indexes ended lower. The S&P 500 fell 0.6% to 7,676.14, the Dow Jones Industrial Average dropped 1.2% to 52,787.53 and the Nasdaq Composite declined 0.3% to 26,421.41. The S&P 500 health care sector slumped 2.6%.
The U.S. Bureau of Labor Statistics reported that employers added 162,000 nonfarm jobs in August, well above the 55,000 increase expected and nearly triple the forecast. The unemployment rate stayed at 4.1%, while June and July payrolls were revised upward by a combined 55,000. Traders raised the probability of a quarter-point Fed hike in September to about 60%, according to the CME FedWatch tool.
Oil prices rose on escalating military exchanges in the Middle East. Brent crude futures gained 2.1% to $99.05 a barrel and briefly reached $99.45 after the contract had jumped 9.3% in the prior week. The U.S. and Iran engaged directly for the first time since July. On Saturday, U.S. Central Command struck three Iranian crude oil carriers in response to Islamic Revolutionary Guard Corps missile attacks on two U.S. Navy warships. On Sunday, Iranian state media said Tehran targeted six ships in the Strait of Hormuz and the Persian Gulf, including three tankers and three U.S. vessels. On Monday, Iran launched a second wave of attacks against U.S. Navy ships, according to The Wall Street Journal citing U.S. officials; no American ships were hit.
Supply disruption risks added to the price pressure. TankerTrackers.com data showed Middle East crude exports in August were down 39% from a January-February baseline of 18.5 million barrels per day. Saudi Aramco’s 400,000-barrel-per-day Jazan refinery near the Red Sea was also targeted by fresh drone and missile strikes. Iranian officials warned that the region’s oil and gas production chain is exposed and that American companies operating in the waters share that exposure.
Yerbol Orynbayev, former World Bank governor of Kazakhstan, said the jobs report was a double-edged sword, noting that stronger employment and high inflation raise the likelihood of Federal Reserve tightening. He also said political pressure to lower borrowing costs could intensify amid high fuel prices and the Middle East conflict. Iranian official Mohsen Rezaee said Washington had received a clear warning from Iran's new missiles and threatened a maritime exclusion zone across the Persian Gulf.
In corporate news, Qualcomm shares rose 3.2% after the company announced a multi-generational collaboration with Amazon to develop customized silicon and AI data center optical connectivity. Qualcomm will give Amazon a warrant to buy up to 25 million shares of its common stock.
Health care shares were pressured by clinical trial setbacks. Novartis fell 13.93% after trial updates announced on Friday and Tuesday, while Amgen dropped 10.08% on the spillover. The next U.S. consumer price index reading is due Friday.
