Dow Drops 1.2% as Brent Tops $117 and Thursday's Defensive Trade Unwinds

U.S. stocks closed lower on Friday, Oct. 23, led by the Dow Jones Industrial Average, as Brent crude rose above $117 a barrel on escalating Middle East fighting, the defensive shares that had sheltered investors during Thursday's technology rout gave back their gains, and chip and memory stocks stabilized.

The Dow Jones Industrial Average fell 1.2% on Friday, shedding 650 points, the S&P 500 fell 0.5% and the Nasdaq Composite fell 0.2%. Energy and information technology were the only S&P 500 sectors to finish in the green, a narrow pattern that summed up the session: oil strength on one side, a steadier technology tape on the other, and selling almost everywhere else.

For the week, the Dow rose 0.4%, its third straight weekly gain and the only one of the three major indexes to finish higher, while the S&P 500 fell 0.5% and the Nasdaq fell 0.7%. Friday inverted Thursday's trade. On Thursday the Dow had closed almost flat, up 0.02%, while the S&P 500 fell 1.21% and the Nasdaq fell 2.60% as investors hid in defensive shares; on Friday those defensive groups were sold, the financial sector weighed on the Dow, and the technology-heavy Nasdaq's loss was the smallest of the three.

Oil set the terms, with Brent at its highest since late April

West Texas Intermediate crude futures rose 4% to $103.45 a barrel at 4 p.m. ET, and Brent crude futures rose 3.4% to $117, their highest level since late April. The move extended Thursday's gains as the fighting widened: Iran-backed Houthi rebels launched further missile and drone strikes on Saudi Arabia, hitting targets that included the port of Yanbu, oil infrastructure and an airport, while reports said the United States and Israel are drawing up plans for renewed strikes on Iran and Iran threatened to strike airports and other civilian targets in neighboring countries if those strikes resume.

The shock is already a household story. The national average for a gallon of regular gasoline rose to $4.29 on Friday, according to AAA, compared with $3.07 a year earlier, one reason the oil move carries weight eleven days before the Nov. 3 midterm elections, and one reason the day's consumer data, below, matters to the rate debate.

The defensive trade unwound, and American Express led the Dow lower

American Express fell about 4% after it announced a plan to cut about 5% of its global workforce, roughly 3,500 roles, with a $336 million restructuring charge, even as it raised its full-year GAAP earnings guide to $18.30 to $18.60 a share, with adjusted earnings of $17.60 to $17.90, on record third-quarter revenue of $20.06 billion, up 9%. TickerGrove covered the results, the affluent-spending detail and the guide in separate coverage published Friday; in the closing tape, the stock was the Dow's clearest company-specific drag.

The post-earnings and single-name list ran the same direction. Bloom Energy fell 11%, Deckers Outdoor fell 5%, Newmont fell 4.5% and Western Digital fell 2.5%, while Moderna fell 2% a day after its 18% drop. Meta Platforms fell about 1% further after Thursday's 7% decline, and Nvidia and Tesla were down slightly after falling 4.5% and 3% on Thursday.

Towers rose and carriers fell again on the SpaceX talks

For a second session, the reported SpaceX plan to secure at least 80,000 cell sites repriced the wireless complex. Crown Castle rose 9.5% and American Tower rose 4%, while AT&T, Verizon and T-Mobile fell between 1.5% and 7.5%, and SpaceX itself rose 2% after Thursday's 9% drop. TickerGrove reported the talks and the sector slide in separate coverage published Friday; the wrap's point is narrower, in that the repricing held into the close rather than fading with the session.

Chips and memory steadied after Thursday's rout

The Roundhill Memory ETF rose 3% after Thursday's 7% plunge, SK Hynix rose 4%, and the iShares Semiconductor ETF rose 0.5% after a drop of about 6.5% on Thursday. The Roundhill MAGS ETF, which tracks the Magnificent Seven, fell 0.5% after losing more than 3% on Thursday. Stabilization is not a recovery, and the semiconductor complex still finished the week deeply lower, but Friday's small Nasdaq decline, against Thursday's 2.60% fall, shows the selling that defined the week pausing where it began.

Rates, the data and the Fed meeting that now decides the tone

The 10-year Treasury yield closed the day at 4.99%, after tumbling 17 basis points on Thursday to close below 4.96% as investors sought government bonds during the technology selloff. Gold futures fell 1.2% to $4,010 an ounce, the dollar index rose 0.2% to 101.80, and Bitcoin traded around $81,200.

Friday's data pulled in opposite directions, which is precisely the Federal Reserve's problem. The S&P Global flash composite PMI came in at 57.6, in line with expectations and down from September's 58.4, but new orders rose to 58.2, the highest since March 2022, prices charged rose to 59.8, the highest since August 2022, supplier delivery times fell to 38.1, a more-than-four-year low, and factory employment rose to its highest since March 2012. Against that, the University of Michigan's final consumer sentiment reading was 48.0, revised up from the 46.3 preliminary but essentially flat against September's final 48.1 and still the second-lowest on record, with one-year inflation expectations at 4.7% and five-year expectations at 3.5%. In Europe, France's flash composite PMI contracted to 48.4 from 51.1.

The Federal Open Market Committee meets on Oct. 27 and 28, and markets priced just a 10% probability of a rate hike at that meeting and nearly 80% for December. The week's calendar is heavy: Boeing reports third-quarter results on Oct. 27, the advance reading on third-quarter GDP arrives Oct. 29 alongside September personal income and outlays, including the PCE price data the Fed watches most closely. Moody's review of France's Aa3 rating, on negative outlook, was due after Friday's U.S. close and had not been published in the sources checked at build time, and protests are scheduled in France on Saturday, Oct. 24, so the European leg of this story may move before U.S. markets reopen.