Today’s News
U.S. stocks closed lower on Tuesday, with the Nasdaq dropping more than 1%, as investors grew cautious following Iran’s missile strike on Israel. Iran fired ballistic missiles in retaliation for Israel’s military actions against Hezbollah, a key ally of Tehran.
In response, President Joe Biden directed the U.S. military to assist Israel and intercept any missiles aimed at the country, according to the White House National Security Council.
Image Source: Bloomberg
Despite the overall market decline, shares of energy companies rose alongside U.S. oil prices, which gained 2.4%. Exxon Mobil saw a 2.3% increase, while defense stocks like Northrop Grumman and Lockheed Martin rallied 3% and 3.6%, respectively. The S&P 500 aerospace and defense index hit a record high, and utilities also advanced, with a 0.8% rise.
Airline stocks, however, faced declines, with Delta Air Lines falling 1.6%.
Investors grew risk-averse due to the Middle East conflict, but major indexes recovered slightly from their intraday lows. “If we do see further escalation, I could see continued market weakness because we just don’t know how far this is going to go,” said Peter Tuz, president of Chase Investment Counsel. “The level of risk has increased. The markets have had a good year, and people can get scared out of the market depending on what happens over the next couple of weeks.”
The Dow Jones Industrial Average fell 173.18 points (0.41%) to 42,156.97, the S&P 500 lost 53.73 points (0.93%) to 5,708.75, and the Nasdaq Composite dropped 278.81 points (1.53%) to 17,910.36.
This comes after the three major U.S. indexes posted strong gains in September and for the quarter.
Economic data released earlier showed a rebound in U.S. job openings for August, while the Institute for Supply Management (ISM) reported that manufacturing activity reached 47.2 in September, just below estimates of 47.5. Investors remain cautious ahead of Thursday’s jobless claims data and Friday’s monthly payroll report.
Stock Volatility Rises and Shifting Fed Rate Cut Expectations
Market volatility increased, with the CBOE’s VIX, known as Wall Street’s fear gauge, rising. Traders are now pricing in a 38% chance of a 50-basis-point interest rate cut by the Federal Reserve in November, up from 35% on Monday but down from 58% a week earlier, according to CME Group’s FedWatch Tool.
Investors also kept an eye on the ongoing port strike on the East and Gulf Coasts, which has halted about half of the nation’s ocean shipping. Although not expected to cause disruptions as severe as those during the COVID-19 pandemic, the strike still adds economic uncertainty for Fed policymakers to assess.
Declining stocks outnumbered advancing ones by a 1.32-to-1 ratio on the NYSE, and a 2.36-to-1 ratio on Nasdaq. The S&P 500 recorded 51 new 52-week highs and two new lows, while the Nasdaq Composite saw 75 new highs and 137 new lows. Trading volume on U.S. exchanges was 13.16 billion shares, above the 20-day average of 11.98 billion.
Other News
Why Bond Investors Favor Spain Over France
Spain’s stronger growth and fiscal discipline make it more attractive to bond investors than France, which faces rising deficits and political uncertainty.
U.S. Short-Term Rate Spikes on Liquidity Strain
The U.S. Secured Overnight Financing Rate (SOFR) jumped on Monday, indicating tighter liquidity and funding pressures at the end of the month.
UniCredit’s ‘Federal Model’ Strengthens Units
CEO Andrea Orcel highlights UniCredit’s “federal model” and supports further European financial integration and a potential Commerzbank merger.
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