On Tuesday, October 1, 2024, U.S. stock markets experienced a downturn amid escalating tensions in the Middle East, which dampened investor sentiment following a strong quarterly performance. The Dow Jones Industrial Average recorded a slight decline of 17 points, translating to a decrease of 0.1%. The S&P 500 index fell by 0.6%, while the Nasdaq Composite saw a more significant drop of 1.2%.
The rise in oil prices was notable, particularly for West Texas Intermediate (WTI) crude, following reports that Iran had launched missile attacks against Israel. This surge in oil prices was accompanied by an increase in the CBOE Volatility Index (VIX), often referred to as Wall Street’s fear gauge, which surpassed the 20 mark, indicating heightened anxiety among traders.
Despite the initial spike in oil prices, the market showed signs of stabilization as traders anticipated that the damage from the Iranian attack—and any potential Israeli retaliation—would be limited. Keith Buchanan, a senior portfolio manager at Globalt Investments, commented on the situation, stating, “The fear of contagion is always destabilizing. Aside from, of course, the paramount impact on lives, the markets take a direct hit when there are forces that are almost promising some level of destabilization.”
During the trading session, approximately three out of every five S&P 500 stocks experienced declines, highlighting the widespread challenges facing the market. However, energy stocks demonstrated resilience, with the energy sector of the S&P 500 climbing nearly 2% in response to the geopolitical developments.
In contrast, technology stocks were particularly hard hit, contributing to the Nasdaq’s larger losses. Major tech companies such as Tesla, Nvidia, and Apple all saw their shares drop by more than 3%. Interestingly, Meta Platforms, the parent company of Facebook, defied the downward trend by rising to near all-time highs.
Small-cap stocks also faced challenges, with the Russell 2000 index declining by more than 1%. This pullback came after a successful month and quarter for the stock market, as the S&P 500 and Dow had recently achieved record closing levels.
September typically marks a challenging month for stocks, but this year proved to be different, as all three major indices—the S&P 500, Dow, and Nasdaq—posted monthly gains. Notably, this was the first positive September for the S&P 500 since 2019, with all three indices concluding the third quarter on a positive note.
On the preceding Monday, stocks had advanced despite Federal Reserve Chair Jerome Powell’s remarks indicating that the central bank is not on a predetermined path regarding future interest rate policies. Powell suggested that if the economy performs as anticipated, investors could expect two more rate cuts this year, each by a quarter percentage point.
Looking ahead, investors are now focused on the upcoming nonfarm payrolls report for September, scheduled for release on Friday. This report could serve as a significant catalyst for market movement, providing insights into the health of the labor market and broader economic conditions.
As the situation in the Middle East continues to unfold, market participants will be closely monitoring developments that could impact global oil prices and overall market stability. The interplay between geopolitical events and economic indicators will be crucial in shaping investor sentiment in the coming days.
