US stocks slip, oil gains as Mideast risks rise

U.S. stocks wavered Thursday as the prospect of escalating conflict in the Middle East damped risk appetite. Crude oil extended gains.

The S&P 500 fell 0.2% while the Nasdaq 100 dipped 0.5%, with U.S.-listed China stocks sliding after big gains this week. Among single stocks, Levi Strauss shares slumped after the apparel company lowered its revenue growth outlook for the full year. Bloomberg’s dollar index gained for a fourth day, bolstered by a rise in Treasury yields.

Global equities are on course for their first weekly loss in four as the world awaits Israel’s response to a missile strike by Iran. Israel’s warplanes bombed Beirut overnight, after eight of its soldiers were killed in southern Lebanon in battles against Hezbollah. Amid the geopolitical uncertainty, investors are also looking for signals on the health of the U.S. economy, with the key monthly payrolls report due on Friday.

Applications for U.S. unemployment benefits rose slightly last week to a level that is consistent with a limited number of layoffs. Continuing claims, a proxy for the number of people receiving benefits, were little changed at 1.83 million in the previous week, according to Labor Department data released Thursday.

Initial jobless claims “on balance continue to look quite low, which is a good sign for the job market,” according to JPMorgan Chase & Co.’s Abiel Reinhart.

To Michael Metcalfe, head of macro strategy at State Street Global Markets, international conflict has returned as a driver for markets. “There might be a pressure to rebalance, because markets are stretched and I don’t see that as being particularly positive for U.S. equities,” he said.

Richmond Fed President Tom Barkin on Wednesday noted progress on inflation and added the labor market is in “good shape,” but cautioned it’s too early for the central bank to declare victory. Swaps traders were penciling in some 34 basis points of policy easing at the central bank’s November meeting, down from 44 basis points just last week.

Fed officials will see fresh labor market data Friday. The unemployment rate is forecast to hold steady at 4.2% in September. Payrolls are expected to rise by 150,000.

“I am of course nervous heading into tomorrow’s jobs report,” Kallum Pickering, chief economist at Peel Hunt, said on Bloomberg Television. “If the unemployment rate ticks up, I wouldn’t be surprised that markets would shift back toward expecting 50 basis points and then it is a question of how the Fed may react.”

Crude oil rose for a third day. Brent crude traded around $75 a barrel, on course for the longest run of daily gains since August, while West Texas Intermediate neared $72. Investors are concerned that, should Israel strike key Iranian assets, the Islamic Republic will lash out and escalate their conflict, dragging in more countries and potentially disrupting global energy shipments.

“The question has been about how aggressive Israel’s response will be and whether energy infrastructure will be impacted,” said Jun Rong Yeap, a market strategist at IG Asia Pte.

Meanwhile, European stocks declined, with all industry sectors in the red. France’s CAC 40 stock benchmark underperformed after French President Emmanuel Macron endorsed a temporary tax on the country’s largest companies.

The British pound was on course for its worst day against the euro since 2022 after the Guardian reported Bank of England Governor Andrew Bailey saying the central bank could be a “bit more aggressive” with interest-rate cuts.