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Late dip-buying pulled technology and consumer discretionary into positive territory with energy, but all the other stock market sectors were down after crude oil prices surged to 52-week highs on reports Iran attacked a tanker in the Persian Gulf. Investors, traders and speculators will now look forward to Jobs Friday and what the employment situation says about interest rates amid persistent inflation anxiety.
The Cboe Volatility Index (VIX) spiked as high as 25.84 from 21.15 on Wednesday as a volatile week on Wall Street continues. A normal range for the stock market’s “fear index” is between 12 and 20.
“Iran doesn’t need to sink a single U.S. warship,” BCA Research Chief Strategist Dhaval Joshi observes. “It could inflict much more damage by sinking the U.S. stock and bond markets by disrupting shipping, trade, and oil tankers with decentralised low-tech drone warfare.”
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Although the Islamic Republic has apparently demonstrated its intent and its capability on this front, as Joshi sees it, “The 12-month investment call will be dominated not by Iran, but by the evolution of AI in the economy, and its fallout in the financial markets.”
War in the Persian Gulf “is a catalyst for countertrend moves in the most aggressive selloffs and rallies,” the strategist says, noting that U.S. equities and the U.S. dollar “will have a countertrend outperformance.” Indeed, the U.S. Dollar Index (DXY) was up 0.3% on Thursday.
The front-month West Texas Intermediate (WTI) crude oil futures contract rose as high as $82.16 per barrel and settled up 6.9% at $79.82, a fresh 52-week high. Joshi suggests emerging markets, Japan, industrial stocks and materials stocks will underperform in the current environment.
At the closing bell, the blue-chip Dow Jones Industrial Average was down 1.6% to 47,954 and is now in negative territory for the year to date at -0.2%. The broad-based S&P 500 was down 0.9% to 6,806 and the tech-heavy Nasdaq Composite had shed 0.3% to 22,748.
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Sea of red
“Supermajor” integrated energy company Chevron (CVX) added 2.1%, and International Business Machines (IBM, +2.7%), Microsoft (MSFT, +1.4%) and Amazon.com (AMZN, +1.0%) also closed higher. Nvidia (NVDA, +0.2%) rallied late, too, but it was a sea of red for the other 24 components of the price-weighted index.
“While the uncertainty of the situation in the Middle East shouldn’t be dismissed,” Morgan Stanley Managing Director Daniel Skelly writes, the historical record suggests the volatility surrounding these types of events has tended to be relatively short-lived.”
Skelly suggests that “when the geopolitical picture begins to clear,” markets will refocus on artificial intelligence spending and disruption. “Contrary to the prevailing zeitgeist, we believe corporate America will ultimately forge a collaborative relationship with GenAI tools.”
Ciena beats, raises and sells off
Results were driven by “unprecedented, broad-based demand,” CEO Gary Smith said in a statement, noting that Ciena is “well-positioned to meet multi‑year demand as AI‑driven networking continues to scale.”
As Needham analyst Ryan Koontz notes, the stock sold off “on high expectations” after a year-to-date gain of about 50% heading into the earnings announcement.
Needham reiterated his Buy rating and raised his 12-month target price from $280 to $370, citing results and guidance as well as “meaningful upside” potential for fiscal 2026 and 2027 forecasts.
New CEO Greg Abel is buying Berkshire Hathaway stock
Berkshire Hathaway (BRK.B) was up 2.6% on Thursday after new management said in a regulatory filing that it’s executing an existing stock buyback plan and that CEO Greg Abel, who replaced Warren Buffett in January, is also buying shares.
Berkshire’s stock buyback policy permits management to purchase shares in the open market if the CEO and the chairman of the board say the price of the stock is below its intrinsic value. Buffett still chairs the Berkshire board.
It’s the first time Berkshire has bought its own shares since the first quarter of 2024. “I absolutely talked to Warren” about the value and the timing of the trade, Abel told CNBC.
The new CEO bought $15 million worth of Berkshire stock, an amount equal to his annual after-tax salary and said he plans to use his pay to buy Berkshire stock every year.
Berkshire doesn’t usually announce when it repurchases stock. “We felt it was important to communicate to our shareholders, our partners, our owners, with the transition of leadership,” Abel explained.
