Wall Street posts three-week losing streak as Iran war batters sentiment
Market volatility remains high. Tech is weak. Interest rates creep higher.
It’s encouraging that the Russell 2000 is leading YTD, followed by the Dow in a catch-up move on an LTM basis, with the NASDAQ now ahead of the Magnificent 7 LTM. Size still matters, where you see the market-weight S&P 47% higher than the even-weight LTM.
We got generally positive economic reports today, with initial jobless claims below forecast and continuing claims only slightly higher, easing employment concerns. Unit labor costs continue to fall, though the reporting remains delayed. 3Q25 unit labor costs fell 1.9% and 2Q25 was revised to -2.9%, a trend that AI is expected to have a big impact on. Likewise, nonfarm productivity (also reported late) continues to rise, coming in for 3Q25 at +4.9%, on forecast, and 2Q25 was revised up to +4.1%.
The big news was the dramatic fall in the trade balance (also delayed) with October coming in -$29.4B, far better than the -$58.1B forecast, and 2Q25 was revised lower, all thanks to falling imports and rising exports. The tariff strategy appears to be working.
While stocks reacted positively to the economic news, interest rates continued to rise. The US 2-year is up to 3.48% after almost hitting 3.5%. The 10-year is up 4bps to 4.18%. Relief on the lower interest rates keeps getting kicked down the road.
On the commodity front, precious metals saw selling overnight but have rallied back after the US market opened. Gold and copper are flat, silver is down 2.8% (but still up 6.4% in a week). Crude oil and gasoline are slightly higher, and natural gas is slightly lower. Crypto is softer again, down 3 days in a row with Bitcoin at $90.7K.
The news is dominated by political activity, which is becoming quite colorful, including Trump telling defense companies to stop buybacks and dividends and build more capacity, and that he wants to ban investment firms from buying houses. He’s also proposed a 50% increase in the defense budget in ’27. But the biggest news will be the ruling on tariffs, expected tomorrow. Expect volatility if it’s determined to be illegal, a rally if it comes in as allowed.
The trend remains positive.