Dow Jones Plunges 627 Points, S&P 500 Slides 0.58% as Oil Surges Past $98 and Rate Hike Odds Hit 60%

Mumbai, Sept 8: US stock markets commenced the holiday-shortened trading week with broad-based losses on Tuesday, as escalating geopolitical tensions in the Middle East propelled crude oil prices toward the critical $100 per barrel threshold, reigniting inflation anxieties and firming expectations for a Federal Reserve rate hike later this month.  

The Dow Jones Industrial Average suffered its most severe decline since August 20, shedding over 600 points, while the S&P 500 and Nasdaq Composite also finished in negative territory. The sell-off was exacerbated by a resurgence in US-Canada trade hostilities and a sharp rise in Treasury yields, which collectively overshadowed strength in the semiconductor sector. 

Dow Jones Sheds 627 Points as Amgen’s 10% Plunge Triggers 1.18% Index Rout 

The Dow Jones Industrial Average (^DJI) experienced a precipitous fall, plunging 627.85 points, or 1.18%, to close at 52,786.40. The index opened at 53,110.45 and traded within a day range of 52,721.62 to 53,110.45, failing to reclaim its previous close of 53,414.25. This marked the blue-chip index’s second consecutive session of losses and its worst single-day performance in nearly three weeks. 

The decline was widespread, with only six of the 30 components ending in positive territory. Amgen (AMGN) was the heaviest weight on the index, plummeting 10.08% to $393.17 amid renewed concerns over its cholesterol drug candidate following a rival’s failed trial. Salesforce (CRM) also exerted significant downward pressure, falling 3.87%, while Apple (AAPL) and Microsoft (MSFT) declined 1.14% and 1.15%, respectively. Boeing (BA) slipped 0.72% amid trade tensions with Canada. Offsetting some of the losses, Caterpillar (CAT) gained 1.09%, and Chevron (CVX) advanced 0.67% in tandem with rising oil prices. 

S&P 500 Drops 45 Points as Healthcare Sector’s 1% Decline Offsets Energy Gains 

The benchmark S&P 500 (^GSPC) declined 45.09 points, or 0.58%, settling at 7,673.51. The index opened at 7,717.81 and traded between a low of 7,666.99 and a high of 7,717.81. Eight of the 11 primary sectors concluded the session in negative territory, with the index failing to hold above the 7,700 level. 

The Health Care sector was the session’s worst performer, dragged lower by Amgen’s 10.08% collapse, alongside declines in Stryker (SYK) which fell 8.83% following supply chain guidance, and Boston Scientific (BSX) which dropped over 5%. The Consumer Discretionary sector also struggled, with Booking Holdings (BKNG) tumbling 6.70% and Airbnb (ABNB) losing 4.09%. Conversely, the Energy sector was the standout gainer, rising 1.5%, buoyed by surging crude prices, with Exxon Mobil (XOM) rising 0.78% and Chevron (CVX) adding 0.67%. 

Nasdaq Composite Outperforms with 85-Point Dip as Semiconductor Rally Offsets Software Slump 

The tech-heavy Nasdaq Composite (^IXIC) proved more resilient than its peers, falling 85.58 points, or 0.32%, to close at 26,421.41. The index opened at 26,528.57 and moved within a daily range of 26,341.17 to 26,542.14, demonstrating relative strength compared to the Dow’s steep decline. 

While software stocks faced significant pressure, a powerful rally in semiconductor names provided a substantial buffer for the index. Intel (INTC) surged 9.05% following an analyst upgrade and reports of potential price increases. Advanced Micro Devices (AMD) climbed 5.89%, and Broadcom (AVGO) advanced 3.01%. However, this strength was countered by sharp declines in software giants, with Shopify (SHOP) falling 7.57%, Adobe (ADBE) dropping 3.47%, and ServiceNow (NOW) tumbling nearly 5%. 

Russell 2000 Declines 9 Points as Small-Caps Show Resilience Amid Energy Sector Strength 

Despite the broader market sell-off, the Russell 2000 Index (^RUT) demonstrated relative strength, declining a modest 9.15 points, or 0.31%, to close at 2,966.50. The index opened at 2,969.59 and traded between a low of 2,959.95 and a high of 2,975.48. Small-cap stocks found support from the energy sector, with names like Bloom Energy (BE) surging 9.57% and NuScale Power (SMR) jumping 15.11%. 

The S&P 100 Index (OEX) fell 0.52% or 20.01 points to close at 3,804.12. The index traded between a low of 3,797.78 and a high of 3,823.50. The Dow Jones Composite Average (DJC) declined 0.92% or 154.07 points to 16,620.70. Within its components, the Dow Jones Transportation Average (DJT) fell 1.00% or 211.03 points to 20,800.70, while the Dow Jones Utility Average (DJU) bucked the trend, gaining 0.90% or 9.76 points to close at 1,092.54. 

Also Read: How to invest in US stocks

Semiconductor Index Surges 1.30% as Chip Stocks Outperform Broader Tech Sector 

The PHLX Semiconductor Sector Index (SOX) was a bright spot, surging 152.61 points, or 1.30%, to close at 11,887.87. The index opened at 11,987.29 and reached an intraday high of 12,023.86. The rally was broad-based, with Intel gaining over 9%, AMD rising nearly 6%, and Qualcomm (QCOM) advancing 3.15%. Lam Research (LRCX) gained 4.15%, while Applied Materials (AMAT) rose 3.97%. 

The NYSE Composite Index (NYA) fell 138.51 points, or 0.56%, to close at 24,500.73. The index opened at 24,639.25 and touched a low of 24,500.73. The S&P MidCap 400 showed resilience, gaining 0.1%, while the S&P SmallCap 600 declined modestly amid the broader weakness. The MidCap 400 has gained 14.5% year-to-date. 

Oil Surges Past $98 as Middle East Attacks Trigger Supply Disruption Fears 

The primary catalyst for Tuesday’s market decline was a sharp spike in crude oil prices, driven by escalating geopolitical tensions in the Middle East. Brent crude futures, the global benchmark, surged 1.73% to trade near $98.66 per barrel, its highest level since July 24. West Texas Intermediate (WTI) crude also climbed for a sixth consecutive session, rising above $93 per barrel. 

The price surge followed reports that Yemen’s Iran-backed Houthi rebels had attacked energy facilities in Saudi Arabia. Concurrently, Iran issued warnings regarding potential attacks on US interests in the Middle East, further stoking fears of a broader conflict that could disrupt global energy supplies from the critical Strait of Hormuz. Goldman Sachs warned that oil prices could climb as high as $120 per barrel if attacks on shipping in the region intensify. The iShares Global Energy ETF (IXC) hit an all-time high, rising 1.47%. 

Treasury Yields Approach 4.80% as Rate Hike Probability Jumps to 60% 

The rally in oil prices reverberated through the bond market, pushing Treasury yields higher as inflation concerns intensified. The yield on the benchmark 10-year Treasury note rose to 4.80%, its highest level since November 2023. The 30-year Treasury yield climbed to 5.246%, while the 2-year yield edged higher to 4.389%. 

The CME FedWatch Tool indicated that traders were pricing a 60% probability of a 25-basis-point rate hike at the Federal Reserve’s September meeting. This marked a significant shift from expectations just days earlier, following a stronger-than-expected August jobs report that showed the economy added 162,000 jobs, well above the 52,000 forecast. The unemployment rate held steady at 4.1%. The three-year US Treasury yield was little changed after an auction, settling at 4.462%. 

Gold Falls 1.5% to $4,407 as Dollar Weakness Fails to Offset Rate Hike Jitters 

In the commodities market, gold futures fell 1.5% to $4,407.60 per ounce as rising rate hike expectations increased the opportunity cost of holding the non-yielding asset. The precious metal had rallied 10% in August but has come under pressure in recent sessions. Spot gold declined 0.1% to $4,398.71 per ounce. 

The US Dollar Index (DXY) declined 0.4% to 98.83. The EUR/USD pair edged higher, while the USD/JPY pair remained volatile amid the shifting rate expectations. Copper prices hit an all-time high, approaching $14,800 per metric ton, driven by tariff-related supply concerns and strong demand from data centers and renewable energy sectors. Comex copper futures traded near $6.85 per pound, while London Metal Exchange copper touched $14,617 per metric ton. 

Energy Sector Leads 1.5% Gain as Healthcare and Consumer Discretionary Sectors Weaken 

A detailed examination of the S&P 500’s 11 sectors revealed a stark divergence in performance. The Energy sector was the clear leader, rising 1.5% as oil prices surged. The Information Technology sector managed a modest gain of 0.2%, supported by the semiconductor rally but weighed down by software weakness. 

The Health Care sector was the session’s worst performer, falling over 1%, dragged by Amgen and Stryker. The Consumer Discretionary sector also declined more than 1%, with Booking Holdings and Airbnb leading the losses. The Financials sector fell 0.8%, while Communication Services declined 0.9%. The Utilities sector gained 0.3%, while Real Estate and Materials sectors posted modest declines. 

Also Read: What Is the S&P 500? A Simple Guide for Everyday Investors

Semiconductor and Memory Stocks Shine as Software Names Face Sharp Sell-Off 

Within the technology sector, semiconductor stocks demonstrated remarkable strength. The iShares Semiconductor ETF (SOXX) gained approximately 1.5% as chipmakers benefited from AI demand optimism. Memory stocks were particularly strong, with Seagate Technology (STX) jumping 6.43% and Western Digital (WDC) gaining 2.14%. The Roundhill Memory ETF (DRAM) finished approximately 2% higher. 

This strength contrasted sharply with the performance of software stocks, which came under significant pressure. The iShares Expanded Tech-Software Sector ETF (IGV) declined nearly 2% as investors rotated away from the group. The divergence highlighted the market’s preference for hardware and semiconductor companies positioned to benefit from the AI infrastructure buildout. Magnificent Seven stocks ended mostly lower, with the Roundhill Magnificent Seven ETF (MAGS) closing down 0.4%. Tesla (TSLA) rose 3.98%, while Nvidia (NVDA) fell 1.99%, Apple dropped 1.14%, and Microsoft declined 1.15%. 

Top Gainers and Losers: Intel Surges 9% While Amgen and Novartis Plummet 

Tuesday’s trading session witnessed dramatic divergence among individual stocks. The top gainers were led by Intel Corporation (INTC), which surged 9.05% to $104.47 following an analyst upgrade and reports of October price increases. Roivant Sciences (ROIV) jumped 18.75% to $41.48, while DigitalOcean (DOCN) soared 12.56% to $126.60. Semtech (SMTC) gained 9.96% to $162.62, and Bloom Energy (BE) rose 9.58% to $277.09 on news of its S&P 500 addition. 

The top losers were led by Dyne Therapeutics (DYN), which plummeted 16.37% to $20.31 following a rival drug trial failure. Novartis (NVS) tumbled 13.91% to $137.74 after disappointing clinical trial results. Howmet Aerospace (HWM) fell 10.70%, while Amgen (AMGN) dropped 10.08% to $393.17. Stryker Corporation (SYK) declined 8.83% to $276.36 following supply chain guidance. 

Economic Data and Federal Reserve: Jobs Report and Inflation Data in Focus 

The market’s attention remains fixed on upcoming economic data releases that could influence the Federal Reserve’s September rate decision. The August Consumer Price Index (CPI) report, scheduled for Friday, is expected to be a critical determinant of monetary policy. The Producer Price Index (PPI) is due Thursday, providing an early read on wholesale inflation. 

The New York Federal Reserve’s August consumer survey showed one-year inflation expectations held steady at 3.6%, while the three-year outlook rose to 3.2%, up 0.1 percentage point. The expectation that the unemployment rate will be higher a year from now rose to 44.4%, its highest since April 2020. Federal Reserve Governor Christopher Waller’s recent comments and the stronger-than-expected jobs report have shifted rate expectations, with traders now pricing a 60.6% chance of a rate hike this month. 

Volatility Index Rises as Investors Seek Protection Amid Market Uncertainty 

The CBOE Volatility Index (VIX) , Wall Street’s fear gauge, increased, reflecting heightened investor anxiety. While specific closing data for September 8 was not available, the index had risen 1.5% to 14.53 in the previous session, indicating growing demand for portfolio protection. The elevated volatility readings came as investors grappled with the confluence of rising oil prices, increasing rate hike odds, and escalating geopolitical tensions. The CBOE S&P 500 3-Month Volatility Index (VIX3M) also showed an uptick, suggesting expectations for sustained market turbulence in the coming months. 

US-Canada Trade War Intensifies with 50% Retaliatory Tariffs on $20 Billion Goods 

Adding to market uncertainty, Canada imposed retaliatory tariffs of up to 50% on approximately $20 billion of US goods on Tuesday, escalating the trade dispute between the two neighbouring countries. The tariffs target dairy products, steel, wood products, toilet paper, and metal items, with steel tariffs increasing to 50% from 25% previously. 

US President Donald Trump threatened to block Canadian private jet maker Bombardier’s access to the US market, which accounts for roughly half of the company’s sales. Bombardier shares fell 6.4% following the threat. The escalating trade conflict comes as Canadian Prime Minister Mark Carney described his country as “at war” with the US over trade, with recent polling suggesting Canadians broadly support the tough stance. 

Copper Hits All-Time High of $14,617 as Tariff Worries Drive Supply Tightening 

Copper prices surged to record highs on Tuesday, with London Metal Exchange copper touching $14,617 per metric ton, surpassing the previous record set in January. Comex copper futures traded near $6.85 per pound. The metal’s 17% advance over the past year has been driven by a long-term supply-demand mismatch, with data centres, renewable energy, and power grids driving usage. 

Short-term factors have accelerated the rally, with traders shipping hundreds of thousands of tons to the US to profit from higher prices amid tariff uncertainty. The market continues to price in the possibility of tariffs on primary copper imports, two months after the Department of Commerce was due to issue a report on whether levies are necessary. The Copper Miners ETF (COPX) has rallied 32% year-to-date. 

Also Read: US Stock Market Timings

New York Fed Survey Shows Growing Consumer Concerns About Personal Finances 

A new survey from the New York Federal Reserve revealed that US households grew increasingly anxious about their personal finances and the job market in August. The expectation that the unemployment rate will be higher a year from now surged to its highest reading since the onset of the pandemic in April 2020, rising 1.6 percentage points to 44.4%. 

Despite the growing pessimism, the mean expected probability of losing one’s job slipped to 13.8%, its lowest reading since February. The conflicting signals suggest that while consumers remain confident in their current employment situations, they are increasingly concerned about the broader labour market outlook. The survey comes ahead of key CPI data on Friday, leaving central bank officials divided on whether to hold or raise interest rates. 

Inflation Expected to Accelerate to High-3% Range if Geopolitical Tensions Persist 

Progress on inflation is poised to reverse if geopolitical tensions in the Middle East do not cool, according to macroeconomic analysts. While Friday’s Consumer Price Index report is expected to come in at 3.4%, repeating July’s reading which decelerated from June’s 3.5% and May’s 4.2%, September could feature a figure in the high-3% range if West Texas Intermediate crude does not fall below $90 per barrel soon. 

The inflation outlook remains highly sensitive to energy prices, which have surged over the past month as the US-Iran conflict continues to escalate. Brent crude futures climbed 2.3% to $99.22 a barrel on Tuesday, moving closer to the critical $100 threshold, while WTI crude gained 3.3% to $94.54 a barrel. Higher energy costs are creating fresh inflation worries, with investors concerned that elevated oil prices could keep Treasury yields elevated and make it more difficult for the Federal Reserve to lower interest rates. The central bank’s next policy meeting is scheduled for September 15-16, with traders closely watching for clues about the future trajectory of interest rates. 

The convergence of surging oil prices, rising Treasury yields, and increasing rate hike expectations has created a challenging environment for equities. The upcoming Consumer Price Index and Producer Price Index reports for August will be critical in determining the Federal Reserve’s September rate decision, with the CME FedWatch Tool indicating a 60% probability of a hike. The energy sector’s strong performance against a weakening broader market highlights the importance of sector rotation strategies. The escalation of US-Canada trade tensions adds another layer of uncertainty, while copper’s record highs reflect ongoing supply constraints. Investors should closely monitor geopolitical developments in the Middle East, as any further disruptions to oil supplies could exacerbate inflationary pressures and weigh on risk assets. 

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