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Financial Markets 03/03 15:31
NEW YORK (AP) -- A sell-off for stocks wrapped around the world and hit Wall
Street Tuesday, while oil prices climbed even higher on worries about the
widening war with Iran. But the big moves that rocked markets in the morning
eased substantially as the day progressed.
By the end of trading, the S&P 500 had sunk 0.9%. That would be a solid loss
on a typical day, but the index had been down as much as 2.5% in the morning
because of worries that the war may do more sustained damage to the economy
than feared.
The Dow Jones Industrial Average dropped 403 points, or 0.8%, after plunging
more than 1,200 points earlier in the morning. The Nasdaq composite pared its
loss to 1%.
It was just a day earlier that U.S. stocks opened the morning with a sharp
loss, only to recover all of it and end the day with a tiny gain. Helping to
drive that rebound was a record showing that past wars and conflicts in the
Middle East have not usually meant long-term pain for U.S. stocks.
But that was with the caveat that oil prices did not jump too high, like
above $100 per barrel. On Tuesday, oil prices rose again and raised more
alarms. The price for a barrel of Brent crude, the international standard,
briefly leaped above $84.
The jump lessened through the day, though, which helped moderate the losses
for stocks. Brent settled at $81.40, up 4.7%. A barrel of benchmark U.S. crude
rose 4.7% to $74.56.
The moves showed oil prices, and how much they're set to worsen inflation,
are among the central fears for investors. More expensive fuel will mean less
money for U.S. and other households to spend. It would also raise expenses for
companies worldwide, which would likewise hurt their profits. And corporate
profits are the lifeblood of stock markets.
Tuesday's climb for oil prices came after Iran struck the U.S. Embassy in
Saudi Arabia, part of a widening of targets that also includes areas critical
to the world's oil and natural gas production. Worries are particularly high
about the Strait of Hormuz off the coast of Iran, a narrow passageway where
roughly a fifth of the world's oil passes.
Iranian Brig. Gen. Ebrahim Jabbari, an adviser to the paramilitary
Revolutionary Guard, vowed that any ships that passed through the strait would
be set on fire.
The fears about oil prices ebbed a bit later in the day as President Donald
Trump said the U.S. Navy could begin escorting tankers through the strait, "if
necessary," to "ensure the FREE FLOW of ENERGY to the WORLD."
Making things uncertain for markets is the question about how long this war
may continue.
A major attack by the United States and Israel has already killed Iranian
Supreme Leader Ayatollah Ali Khamenei, but Trump said late Monday night on his
social media network, "Wars can be fought 'forever,' and very successfully"
with the supply of munitions that the United States possesses.
Some professional investors said again Tuesday they don't think this is the
beginning of a long-term down market and that stocks could rebound if the war
doesn't last that long. But they acknowledge it could take a while for that to
become clear, and Tuesday's swings for markets show how uncertain things are.
Tuesday's sell-off started in Asia, where the Kospi stock index in South
Korea, a big energy importer, plunged 7.2% as markets reopened after a holiday
on Monday. That was its worst day since two summers ago, and it had been
setting records recently.
Tokyo's Nikkei 225 dropped 3.1%, even as analysts said Japan has a sizable
stockpile lasting more than 200 days. In Europe, where prices for natural gas
have soared because of the war, France's CAC 40 lost 3.5%.
On Wall Street, nearly three out of every four stocks within the S&P 500
dropped. Unlike a day before, influential Big Tech stocks weren't able to prop
up indexes, and Nvidia fell 1.3%.
Among the winners on Wall Street was Target, which rose 6.7% after the
retailer reported a better profit for the latest quarter than analysts expected.
All told, the S&P 500 fell 64.99 points to 6,816.63. The Dow Jones
Industrial Average dropped 403.51 to 48,501.27, and the Nasdaq composite sank
232.17 to 22,516.69.
In the bond market, Treasury yields leaped in the morning with worries about
inflation. The yield on the 10-year Treasury briefly rose above 4.10% before
pulling back just below 4.06%. It was at 4.05% late Monday and just 3.97% on
Friday.
Higher yields can make it more expensive for U.S. households and businesses
to borrow money, affecting everything from mortgages to bond issuances. They
also put downward pressure on prices for stocks and all kinds of other
investments.
When Treasurys are paying more in interest, they can also undercut the price
of gold, which pays its investors nothing. Gold fell 3.5% Tuesday to settle at
$5,123.70 per ounce, halting a strong run that had taken it above $5,300 as
investors looked for safer places to park their money.
High inflation could also tie the Federal Reserve's hands and keep it from
cutting interest rates. The Fed lowered rates several times last year and
indicated more cuts were to come in 2026. That would help boost the economy and
job market, but lower rates can also worsen inflation.
Traders are now pushing back their forecasts further into the summer for
when the Fed could resume cutting rates, according to data from CME Group.
That's even though Trump has been calling for Fed officials in angry and
personal terms to cut rates now.
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AP Business Writers Yuri Kageyama and Michelle Chapman contributed.
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