US close: Investors take profits as Iran sends missiles into Israel

dl wall street wall st new york city nyc ney york stock exchange nyse nasdaq dow jones industrial average djia trading us usa united states of america 2023120702241 — Sharecast graphic / Josh White

US stocks fell on Tuesday, with the Dow and S&P 500 retreating from record highs and the Nasdaq hitting a two-week low, amid an escalation of conflict in the Middle East.

The Dow fell 0.4% and the S&P 500 dropped 0.9%, while the Nasdaq slumped 1.5% to 17,910.36 – its lowest close since 18 September.

Around 200 missiles were launched from Iran at Israel on Tuesday evening, according to a Pentagon report, which Iran said was a retaliation to the assassination of Hezbollah leader Hassan Nasrallah on Friday. Tensions were already high after Israeli troops crossed the border in southern Lebanon and continued shelling areas nearby along with airstrikes on the capital, Beirut.

Videos of Tuesday's aerial strike quickly circulated across social media, as Israel warned of "consequences" in response. Iran’s Islamic Revolutionary Guard Corps said any retaliation would be met with “further crushing and destructive acts".

Stocks fell sharply as reports came flooding in, while oil prices surged. West Texas Intermediate was up 3.9% at $70.75 a barrel by the close on Wall Street.

"The question is, will this blow over with little escalation, like it did in April, the last time that Iran launched missiles against Israel, or is this the start of a new, more dangerous chapter in the history of this conflict?" said Kathleen Brooks, research director at XTB.

Economic data barrage

A raft of economic indicators were scheduled for release on Tuesday, though market sentiment was being firmly dictated by ongoing developments in the Middle East.

The Institute of Supply Management's manufacturing PMI fell slightly short of expectations for a reading of 47.5 in September at 47.2, continuing to point to a contraction in the manufacturing sector as demand continued to be weak and output fell.

The S&P Global's manufacturing PMI was revised slightly higher to 47.3 in September, up from a preliminary reading of 47 but was still the lowest reading seen since June 2023.

Construction spending decreased by 0.1% in August to a seasonally adjusted annualised rate of $2.13trn, according to the Census Bureau, following a revised 0.5% drop in the previous month and missing forecasts for a 0.1% increase.

Finally, job openings rose by 329,000 to 8.04m in August, according to the Bureau of Labor Statistics' JOLTS report, following an upwardly revised reading of 7.71m in July and above market expectations for a print of 7.65m.

Market movers

Chevron was among the few risers of the session as the oil major followed crude prices higher, along with Exxon Mobil, Occidental Petroleum and ConocoPhillips.

Boeing was also outperforming on reports it is considering raising at least $10bn by selling new stock as it looks to replenish cash reserves depleted further by an ongoing strike. Bloomberg cited people familiar with the discussions as saying that Boeing is working with advisers to explore its options.

Tech heavyweights were under heavy selling pressure during the session, with Intel, Apple and Microsoft among the worst performers. XTB's Brooks suggested tech stocks were bearing the brunt of a flock to safety.

"While there is no obvious reason why US tech should sell off on the back of Middle East tensions, it could be a rapid reallocation of resources to safe havens, in case this leads to a prolonged conflict in the region," she said.

Dow Jones - Risers

Chevron Corp. (CVX) $149.70 1.65%
Boeing Co. (BA) $154.26 1.43%
Merck & Co. Inc. (MRK) $114.74 1.04%
Visa Inc. (V) $277.60 0.96%
Home Depot Inc. (HD) $409.00 0.95%
Nike Inc. (NKE) $89.13 0.83%
Verizon Communications Inc. (VZ) $45.22 0.67%
Walmart Inc. (WMT) $81.24 0.64%
Travelers Company Inc. (TRV) $235.09 0.43%
Caterpillar Inc. (CAT) $392.66 0.32%