Wall Street Tumbles Amid Geopolitical Tensions and Stable Labor Market Data

Wall Street's main indexes fell on Tuesday due to geopolitical tensions in the Middle East and labor market data. Reports of an imminent Iranian missile attack on Israel contributed to the S&P 500 hitting a near one-week low. A rise in job openings and manufacturing activity data were also factors.

Wall Street's main indexes slid on Tuesday as investors became risk-averse in response to escalating geopolitical tensions in the Middle East and stable labor market data.

A White House official indicated that Iran is preparing to imminently launch a ballistic missile attack against Israel. Consequently, the benchmark S&P 500 extended its losses to a near one-week low. As of 10:21 a.m., the Dow Jones Industrial Average had fallen 346.60 points (0.82%) to 41,982.02, the S&P 500 lost 65.54 points (1.14%) to 5,696.94, and the Nasdaq Composite shed 316.54 points (1.74%) to 17,872.63.

Nine of the 11 S&P 500 sectors trended lower, although a 3% spike in crude prices boosted the energy sector by 1.5%. The Dow Jones Transport Average, which tracks airline stocks, dropped 2%. Wall Street's fear gauge, the CBOE market volatility index, surged 3.46 points to a three-week high of 20.19, while the yield on benchmark Treasury bonds hit session lows.

Additionally, the Labor Department's job openings and labor turnover (JOLTS) survey indicated an increase in job openings to 8.04 million in August, surpassing estimates of 7.66 million. The Institute for Management Supply's (ISM) report showed manufacturing activity at 47.2 in September, below the estimated 47.5.

Traders are now pricing in a 64.6% probability of a 25 bps rate cut at the November meeting, up from over 60% prior to the data release, according to the CME Group's FedWatch Tool. Keith Buchanan, senior portfolio manager at GLOBALT Investments, noted that the labor market data is crucial, as expectations of successive rate cuts by the Federal Reserve drive market sentiment.

Investors are also parsing through remarks from Fed presidents Raphael Bostic and Thomas Barkin, among others, for further insights on the economy and monetary policy outlook. Chair Jerome Powell reiterated on Monday that the Fed is likely to cut borrowing costs by an additional 50 basis points by year-end, influenced by robust consumer spending and gross domestic income data.

Despite September being historically weak for equities, Wall Street's three main indexes closed the month higher, with the S&P 500 and Dow notching their fifth consecutive month of gains. Markets are also closely monitoring a port strike on the East and Gulf Coasts, affecting about half the nation's ocean shipping. Retailers, which account for half of all container volumes, saw shares of Costco and Walmart decline 1.3% and remain flat, respectively.

The NYSE saw declining issues outnumbering advancers by a 1.77-to-1 ratio, and by a 2.95-to-1 ratio on the Nasdaq. The S&P 500 posted 29 new 52-week highs and one new low, while the Nasdaq Composite recorded 38 new highs and 67 new lows.

(With inputs from agencies.)