US stocks experienced significant losses on Monday as investors grappled with escalating tensions in the Middle East and surging bond yields. The S&P 500 (^GSPC) closed down 1.2%, slipping below the 5,100 level, marking a two-day decline of 2.6%, the most substantial drop in over a year. The Dow Jones Industrial Average (^DJI) retreated by 0.7%, while the Nasdaq Composite (^IXIC) fell 1.8%, with Big Tech stocks leading the downturn. All three major indices erased earlier gains during the session.
The 10-year Treasury yield (^TNX) reached its highest level in 2024, hovering around 4.63%, as investors revised expectations for Federal Reserve interest rate cuts. The surge in bond yields added pressure to equities, contributing to the broader market sell-off.
Stocks have faced headwinds amid a lackluster start to earnings season and persistent concerns regarding inflation. The Federal Reserve’s target of 2% inflation has remained elusive, prompting uncertainty among investors regarding the central bank’s future monetary policy decisions.
Initial concerns over a potential conflict in the Middle East following Iran’s attack on Israel on Saturday initially rattled markets. However, efforts by the US to de-escalate tensions provided some relief, leading to a partial recovery in oil prices. West Texas Intermediate crude futures (CL=F) settled above $85 per barrel, while Brent futures (BZ=F) closed just over $90 per barrel as investors awaited Israel’s response.
Goldman Sachs (GS) took the spotlight on Monday’s corporate earnings docket, with the Wall Street lender’s shares surging over 3% after reporting better-than-expected first-quarter profits. The strong performance of big banks helped offset some of the market’s losses.
Tesla (TSLA) shares faced significant selling pressure, plummeting over 5% after the electric vehicle maker announced staff reductions amidst a broader slowdown in EV growth. The news added to concerns surrounding the company’s production and delivery challenges.
The retreat in US stocks amid rising bond yields and escalating tensions in the Middle East underscores the challenges facing investors in the current market environment. As earnings season unfolds and inflation concerns persist, market volatility is likely to persist, with geopolitical developments and central bank actions influencing investor sentiment in the days ahead.
