NEW YORK: Wall Street tumbled on Friday, with losses in heavyweights Nvidia and Microsoft, as the US-Israeli war with Iran entered its fourth week, deepening worries about inflation and the potential for higher interest rates.
The conflict in the Middle East showed no signs of easing. The US military was deploying a large amphibious assault ship with thousands of additional Marines and sailors to the Middle East, while Iran’s new supreme leader hailed Iran’s “unity” and “resistance”.
“The market is finally settling into the idea that this may go on longer than initially expected, and I think that’s why markets are selling off.
“This conflict may go on not for just a few weeks, but maybe beyond several months,” said Jake Dollarhide, CEO of Longbow Asset Management in Tulsa, Oklahoma.
Magnificent seven companies fall
Wall Street’s most valuable companies declined, with Nvidia, Alphabet, Tesla and Meta Platforms each down about 2%. Microsoft dropped 1.5%.
US Treasuries fell for a third session, in step with a broader selloff in UK and European government bonds, as the Middle East conflict kept oil prices elevated and reinforced inflation worries.
US rate futures show the Fed is more likely to raise interest rates than cut them by the end of 2026, according to CME’s FedWatch tool.
“We just have a classic environment that is pushing rates up and it’s driven by higher inflation expectations, which relate back to the oil price.
“And the fact that we’re heading into the fourth week of the war suggests that that stress is not going away anytime soon,” said Padhraic Garvey, head of global rates and debt strategy at ING in New York.
The S&P 500 was down 1.14% at 6,530.91 points.
The Nasdaq declined 1.64% to 21,728.68 points, while the Dow Jones Industrial Average was down 0.68% at 45,707.67 points.
Wall Street’s fear gauge, the CBOE Volatility Index, rose 2.4 points to 26.4.
Nine of the 11 S&P 500 sector indexes declined, led lower by utilities, down 2.48%, followed by a 1.84% loss in real estate.
Energy sector rallies
The S&P 500 energy sector index rose 0.7%, putting it on track for its 13th straight weekly gain.
That week-over-week rally would be its longest since at least the late 1980s, according to LSEG data, as geopolitical events in Venezuela and the Middle East dominated much of the first quarter.
Friday marks the once-in-a-quarter simultaneous expiry of derivatives contracts tied to stocks, index options and futures, also known as “triple witching,” which can boost trading volume and aggravate volatility.
All three main indexes were heading for their fourth straight week of losses and were below their 200-day moving averages, underscoring the recent deterioration of sentiment on Wall Street.
The Russell 2000 index of smaller companies slipped 1.6%, leaving it down almost 10% from its record high close on Jan 22.
Super Micro Computer tumbled 30% after three people associated with the artificial intelligence server maker were charged with smuggling at least US$2.5 billion of AI technology to China. Rival Dell advanced 4.4%.
FedEx, often seen as a barometer of business activity, issued upbeat forecasts and said global demand was holding steady despite geopolitical tensions, sending its shares up 1%.
Declining stocks outnumbered rising ones within the S&P 500 by a 2.4-to-one ratio.
The S&P 500 posted 11 new highs and 26 new lows; the Nasdaq recorded 32 new highs and 202 new lows.
