New York City, U.S. – Stocks on Wall Street experienced a downturn on Tuesday following escalating tensions in the Middle East that dampened investor sentiment after a strong quarter. The Dow Jones Industrial Average dropped 225 points, equivalent to a 0.5% decrease. Similarly, the S&P 500 retreated by 1%, while the Nasdaq Composite saw a decrease of 1.6%.
Reports of Iran potentially launching a ballistic missile directly at Israel caused a surge in West Texas Intermediate crude oil prices. This news prompted a rise in the CBOE Volatility Index, commonly known as Wall Street’s fear gauge, above 20, indicating heightened worries among traders. Keith Buchanan, a senior portfolio manager at Globalt Investments, noted that the fear of contagion always leads to market destabilization, affecting investors.
Approximately 80% of S&P 500 stocks traded lower during the session, underlining the widespread challenges witnessed in the market. Despite this, energy sector stocks surged more than 1% following the Middle East developments. Conversely, technology stocks, led by companies like Apple, Tesla, and Nvidia, faced substantial declines, contributing to the Nasdaq’s significant losses. However, Facebook parent company Meta managed to achieve gains close to all-time highs.
Small-cap stocks, represented by the Russell 2000, also faced a decline of over 1%. The pullback on Tuesday came after the S&P 500 and Dow achieved record highs at the close of the previous session, marking the end of the trading month and quarter. Surprisingly, September broke its historical trend as the worst month of the year to end in gains for major averages like the S&P 500, Dow, and Nasdaq. Federal Reserve Chair Jerome Powell’s comments on rate policy also influenced market sentiment, with expectations of two more cuts this year, depending on economic performance.
Looking ahead, investors await September’s nonfarm payrolls report, scheduled for release on Friday, which could impact the market’s direction. Additionally, a strike by members of the International Longshoremen’s Association on the East and Gulf Coasts is being closely monitored for its potential economic impact, despite consumers not immediately feeling its effects.