NEW YORK: Wall Street’s main indexes fell on Thursday as the Middle East conflict entered its sixth day, raising concerns of fresh inflation pressures that could complicate the Federal Reserve’s monetary policy decisions.
Helping limit the losses was a strong forecast from Broadcom that projected its artificial intelligence chip revenue would exceed USD100 billion next year, sending shares of the chip designer up 5.3 percent.
Despite the US-Israeli air war against Iran showing no signs of cooling off, Wall Street’s main indexes have fared better than their European and Asian counterparts this week, aided primarily by a rebound in technology stocks that bore the brunt of February’s selloff.
The tech-led recovery in the prior session helped the Nasdaq recover all weekly losses, putting it on track to close the week in positive territory if those gains hold through Friday.
Still, a prolonged disruption in shipping through the strategic Strait of Hormuz is likely to further fuel inflation pressures through energy and shipping costs, at a time when US tariffs have already complicated the Fed’s monetary policy outlook.
“The base case for the US itself is that this war should be relatively short-lived which explains why, in absolute terms, equities have not fallen by very much, despite the quite sharp increases we’ve seen in spot commodity prices,” said Kiran Ganesh, multi-asset strategist at UBS Global Wealth Management.
Any signs that crude prices could hit USD100 a barrel would be worrisome for markets and investors were on the lookout for reports that the conflict could be nearing its end. US crude prices jumped to their highest since January, which slammed travel stocks, with the passenger airlines sub-sector tumbling 5.7 percent, while Royal Caribbean Cruises and Viking Holdings lost 1.4 percent and 3.4 percent, respectively.
Policymakers have broadly acknowledged the need to wait and gauge the impact on the economy, although investors are anticipating price pressures to delay a 25-basis-point interest rate cut by the Federal Reserve to October from July, according to LSEG-compiled data.
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