Wall Street ends lower as higher yields, rising oil prices mark shaky start to September
NEW YORK: US stocks extended their slide on Tuesday, as the global bond selloff deepened and crude prices spiked amid fading hopes for a near-term solution to the US-Israeli war with Iran.
US stocks declined on Tuesday due to a worsening bond selloff and soaring oil prices, pushing the market into a shaky start to September. All three major US stock indexes opened the month with losses, closing lower as geopolitical tensions in the Middle East pushed oil prices upward. Global sovereign debt yields climbed to their highest level in years as investors anticipated central banks would accelerate interest rate hikes.
Federal Reserve Chair Kevin Warsh's hawkish remarks on Friday amplified the negative sentiment, with investment strategist Ross Mayfield noting the perfect combination for a risk-averse market trading near all-time highs. September historically has the lowest average return among months since 1926, especially during midterm election years when political uncertainty can impact equity markets.
The US escalated airstrikes in response to Iran's warnings of preventing oil exports from the Gulf, further driving crude prices higher and intensifying inflation concerns. Market participants now view a 68.2 percent probability of the Federal Reserve implementing a 25-basis-point rate hike at the end of its September policy meeting, up from 39.6 percent a week prior.
Reports from the US Labor Department and Purchasing Managers' Index indicated a slowing jobs market, weakening factory activity, and reduced spending on residential construction, all contributing to high prices, supply constraints, and geopolitical uncertainties. The Dow Jones Industrial Average fell 418.97 points (0.79%), the S&P 500 dropped 54.67 points (0.71%), and the Nasdaq Composite declined 271.11 points (1.03%).
Energy stocks led gains, while the consumer discretionary sector suffered the most significant percentage loss. The Dow Jones Transportation Average saw the largest decline at 2.5%. The Philadelphia Semiconductor Index also dipped 2.1%, with all constituents losing value on the day. Declining issues outweighed advancing shares by a ratio of 2.8-to-1 on the NYSE, with 143 new 52-week highs and 410 new lows, while the Nasdaq saw 30 new highs and 161 new lows.
Trading volume on US exchanges totaled 14.38 billion shares, surpassing the 15.35 billion average for the same period over the past 20 trading days.
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