U.S. stocks on Friday ended a holiday-shortened week solidly lower, with the Dow shedding more than 230 points, following escalating tensions in the Middle East and U.S. manufacturing activity that fell to its lowest reading in about a decade.
How did benchmarks perform?
The Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA -0.34% shed 233.92 points, or 0.8%, at 28,634.8. The S&P 500 /zigman2/quotes/210599714/realtime SPX -0.22% fell 23 points, or 0.7%, to 3,234.85. The Nasdaq Composite /zigman2/quotes/210598365/realtime COMP -0.59% slipped 71.42 points, or 0.8%, to 9,020.77. All three benchmarks finished off their lows for the session, however.
The decline marked the worst for the Dow and the S&P 500 since Dec. 3 and the sharpest daily slump for the Nasdaq since Dec. 2, according to Dow Jones Market Data.
For the week, the S&P 500 lost 0.2%, while the Dow shed less than 0.1%. The Nasdaq Composite, meanwhile, managed a weekly gain of 0.2%.
What drove the market?
The Pentagon confirmed late Thursday that the U.S. military had killed Qassem Soleimani, the head of Iran’s Islamic Revolutionary Guard’s Quds Force, and said the strike was aimed at deterring future Iranian attacks.
Iran’s supreme leader, Ayatollah Ali Khamenei, declared three days of mourning for Soleimani’s death and said that a “hard revenge awaits criminals,” responsible for the attack. The Pentagon also said Friday afternoon it was dispatching more than 3,000 additional troops to the Middle East.
President Donald Trump said the U.S. remained “ready and prepared” to act if Americans are threatened following Soleimani’s killing, in televised remarks from his Mar-a-Largo resort in Florida. Earlier Friday he issued a number of tweets and said the top Iranian military commander “should have been taken out many years ago.”
The prospect of sharp retaliation by Iran could keep market participants unnerved in the coming days and weeks.
“The initial reaction will lead to a risk-off for equity markets and upward pressure on oil prices,” Steven Chiavarone, portfolio manager at Federated Investors, told MarketWatch. “But what we don’t know is the timing and severity of Iran’s expected reaction.”
Indeed, the investor flight from risky assets toward traditional safer havens, including gold and U.S. Treasurys, stood in contrast to market action on Thursday, which saw all three major U.S. stock indexes post strong gains, ending the first trading session of 2020 at records. Markets were closed on Wednesday for New Year’s Day.