by Caroline Valetkevitch

NEW YORK (Reuters) – The New York Stock Exchange ended lower on Tuesday, with the Nasdaq falling more than 1%, as investor caution was fueled by Iran’s attack on Israel amid escalation of the conflict in the Middle East.

The Dow Jones index fell 0.41%, or 173.18 points, to 42,156.97 points.

The broader S&P-500 lost 53.73 points, or 0.93%, to 5,708.75 points.

The Nasdaq Composite fell 278.81 points (1.53%) to 17,910.36 points.

US President Joe Biden has asked the US military to help defend Israel in the face of missile salvos launched by Iran in response to offensives carried out by the Israeli army against militias allied with Tehran.

If Wall Street ended down, the energy sector recorded gains, in the wake of the rise in oil prices.

Companies in the defense sector progressed, such as Northrop Grumman and Lockheed Martin, which gained 3% and 3.6% respectively. The aerospace and defense sector is at a record high.

Despite the caution adopted by investors, the main indices erased part of their initial losses at the end of the session.

“The market hasn’t come down as much as I thought it would with this type of escalation” in the Middle East, said Peter Tuz, president of Chase Investment Counsel in Charlottesville, Virginia.

“Further escalation could prolong market weakness, because it is unclear how far it could go,” he added, noting that the “risk level has increased.”

The CBOE Volatility Index, considered a gauge of the level of fear on Wall Street, rose.

Aside from the situation in the Middle East, investors are also keeping an eye on the unprecedented strike by dockworkers on the American East Coast, which has caused the interruption of almost half of maritime deliveries from the United States.

This strike action, which began on Tuesday, is not expected to cause problems in supply chains as significant as during the COVID pandemic, but it complicates the work of the American Federal Reserve (Fed) when it comes to economic forecasts.

According to CME’s FedWatch, traders are betting 62.2% on the hypothesis that the Fed will cut rates by 25 basis points in November. Around a third of them anticipate a possible drop of 50 basis points, compared to 58% a week earlier.

The three main Wall Street indexes ended the month of September and the third quarter on Monday with solid gains.

Data released early Tuesday showed that the number of job openings in the United States rebounded in August, while the ISM manufacturing index remained stable last month.

The monthly employment report and the number of weekly jobless claims in the United States are expected later this week.

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(Written by Jean Terzian)

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