On Monday, the Dow Jones Industrial Average fell more than 500 points, while U.S. Treasury yields rose as traders cut back on bets that the Federal Reserve would ease interest rates. Uncertainty surrounding the Middle East conflict has heightened concerns ahead of the quarterly earnings season and new economic indicators.
In afternoon trading, the Dow Jones Industrial Average fell 432 points, or 1%, to $41,920. The blue-chip index closed at a high of 42,352.75 on Friday.
The S&P 500 and Nasdaq Composite both fell about 1%.
Friday's better-than-expected jobs report led traders to back off bets on a 50 basis point rate cut in November. They had priced in an 86% chance of a 25 basis point rate cut and about a 14% chance that the central bank would not cut rates at all, the paper said. CME's FedWatch Tool.
U.S. Treasury yields rose as expectations for interest rate cuts changed, with the benchmark 10-year Treasury yield exceeding 4% for the first time in two months.
In addition to next month's Federal Reserve meeting, investors are awaiting the start of the third-quarter earnings season with September consumer price index inflation and bank reports to be released this week.
“We think this is a short-term strain that will recover over the next five days as CPI data and bank earnings are released,” said James Demmert, chief investment officer at Main Street Research. .
Demmert noted that the escalating conflict in the Middle East is a concern for U.S. investors who are concerned about the economic impact of wars, such as rising oil prices.
Investors remain concerned about how Israel will respond to Iranian missile attacks. Lebanese militant group Hezbollah fired rockets into the Israeli city of Haifa on Monday, as the Israeli military poised to expand ground air strikes into southern Lebanon.
The CBOE Volatility Index, Wall Street's fear gauge, hit a one-month high.
The single biggest drag on S&P was Amazon, which fell about 3% after Wells Fargo's downgrade.
Pfizer shares rose 2.4% after news that activist investor Starboard Value had acquired about $1 billion in stock in the company.
Air Products & Chemicals rose 8.8%, making it one of the S&P 500's top gainers after reports that activist hedge fund Mantle Ridge had taken a position in the company.
Goldman Sachs raised its target for the S&P 500 index by the end of 2024 to 6,000 from 5,600 and lowered the probability of the U.S. going into recession from 20% to 15%.
