Oil prices soar on Middle East tensions – NBC New York

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What you need to know today

Wall Street hasn’t changed much
The S&P 500 and Nasdaq Composite largely held on to gains in volatile trading ahead of key inflation data. The S&P 500 closed virtually unchanged, 0.23 points higher, while the Nasdaq Composite rose 0.21%, boosted by a rally in Nvidia shares. However, the Dow Jones Industrial Average fell 0.36%. The yield on the 10-year Treasury note fell slightly.

Tensions in the Middle East
U.S. crude prices rose more than 4% Monday to above $80 a barrel as the Pentagon sent additional forces to the Middle East in response to heightened tensions. Defense Secretary Lloyd Austin ordered a carrier strike force, including F-35 warplanes and a submarine with guided missiles, to the region. Israel is bracing for retaliatory attacks by Iran and Hezbollah after the killing of a Hamas leader in Tehran.

Inflation outlook
American consumers believe price increases will gradually ease, with expectations for three-year inflation hitting a record low of 2.3%, according to a report from the New York Federal Reserve. While inflation is expected to remain high over the next year, consumers expect it to fall in subsequent years. The report comes amid expectations that the Federal Reserve could cut interest rates next month. The Labor Department’s consumer price index report, due out Wednesday, is expected to show a 0.2% increase last month and an annual rate of 3%, still above the Fed’s 2% target.

Elliott-Starbucks settlement?
Activist investor Elliott Management and Starbucks are in settlement talks, with potential terms including a board seat for Elliott’s Jesse Cohn and management improvements, according to CNBC’s David Faber. CNBC previously reported that the talks, held last week, would allow CEO Laxman Narasimhan to keep his job and board seat. Retired Starbucks Chairman Howard Schultz has opposed the settlement. Elliott has built a stake in Starbucks worth $2 billion.

Adani shares are falling
Shares of Adani Group companies fell Monday after Hindenburg reported an alleged conflict of interest involving the chairman of India’s securities regulator. Although shares rose sharply, the companies lost $2.4 billion in market value. Hindenburg accused Madhabi Puri Buch, the chairman of India’s securities regulator SEBI, of investing in offshore funds linked to Adani Group. Buch has denied the accusations.

(PRO) Two-month fight
Investors could be facing a difficult two months as Wall Street’s fear gauge recently surged to its highest level since the pandemic. Bank of America notes that the S&P 500 typically falls after such spikes in volatility.

Summary

Nvidia gave Wall Street a boost earlier this week, jumping 4% to boost its profits to more than 120% this year. But the chip giant fell more than 11% in the third quarter as investors expressed concerns about the returns on AI investments and shifted their focus to neglected areas of the market.

Still, UBS analyst Timothy Arcuri reiterated his buy rating on Nvidia ahead of its Aug. 28 earnings report, setting a price target of $150, implying a 37% upside from Monday’s close. Arcuri also raised his forecast for the company’s 2025 earnings per share.

Grasso Global CEO Steve Grasso told CNBC’s “The Exchange” that Nvidia could soon return to $120. “It’s definitely a momentum stock,” Grasso said, noting that it was “a blink of an eye” from $115 during Monday’s session. “I think we’ll see a 120 frame sooner rather than later.”

A more cautious Dan Niles of Niles Investment Management thinks stocks have yet to hit their 2024 low.

Capital investment “is going to be the key around which this market will boom or bust,” Niles said, adding that supply of AI chips is keeping up with demand.

“I definitely believe they’ll beat the quarter in terms of revenue and earnings per share, but similar to what you’ve seen with, you know, Microsoft, Amazon, Google, Tesla. I personally think the outlook could be weak.”

Investment research firm TS Lombard also issued a warning to investors, emphasizing high earnings expectations. However, the firm still sees megacap technology as a key driver of the market.

“Make no mistake, it is still the US tech giants that are driving the stock market,” Konstantinos Venetis and Davide Oneglia wrote to clients. “Their weight—in terms of market capitalization, earnings, and profit margins—is simply too large to allow for a sustained broad market divergence at this stage.”

Meanwhile, Savita Subramanian, head of U.S. equities strategy at Bank of America Securities, advises investors to focus on large-cap and value stocks, particularly in the industrials, financials and materials sectors.

“We’re at a point where you don’t necessarily want to sell the market wholesale, you want to pick and choose your spots,” Subramanian said on CNBC’s “Squawk on the Street.” “I really like the large-cap value stocks here. I think it’s an area of ​​the market that’s undervalued and is poised to do quite well in the coming months, if not years.”

— CNBC’s Alex Harring, Jeff Cox, Sarah Min, Sam Meredith, Rohan Goswami, Brian Evans, Tanaya Macheel and Spencer Kimball contributed to this report.