US stocks saw red on Tuesday as oil prices spiked after reports of an escalation in tensions in the Middle East.
At the time of writing, the Dow Jones Industrial Average shed 187.37 points to be at 42,144.78.
Earlier in the day, the Dow had plunged 300 points. The S&P 500 was down nearly 60 points at 5,702.59, while the Nasdaq index plunged 325.20 points to 17,863.97.
Tech stocks in the US fell sharply today after reports claimed that Iran was prepping a ballistic missile attack against Israel, a move that risks escalating a conflict in the oil-rich Middle East that threatens to suck in the major regional powers as well as the US.
Meanwhile, US defense stocks and oil prices surged after the news broke.
Tech stocks fall sharply
Apple’s stock fell 3.4% on Tuesday, while Microsoft Corporation also slipped more than 2%, following reports of escalation in the Middle East.
Other notable names such as Oracle, dropped 2% on Tuesday, while shares of NVIDIA Corporation plunged more than 3%. Shares of Cisco Systems Inc. also fell 1% on Tuesday.
Additionally, HP Inc and Dell Technologies were among the worst performers in the technology sector, slipping 4% each.
Defense stocks surge
Defense manufacturers are set to benefit from increased tensions in the Middle East as demand for military hardware is likely to rise.
Kratos Defense and Security Solutions Inc, manufacturing concentrations in weapons and military electronics, surged more than 5% on Tuesday.
Other notable defense stocks such as Northrop Grumman, maker of the B-21 stealth bomber, and Lockheed Martin, the prime contractor for the F-35 fighter, each rose 3% in early trading.
Crude oil spikes 4%
Oil prices pared losses from earlier in the day to spike more than 4% on Tuesday after reports of Iran preparing to attack Israel.
Brent and West Texas Intermediate crude prices spent most of the day in the red as poor demand and firm supply outlook dampened investors’ sentiment.
At the time of writing, the WTI crude price was 4.1% higher at $70.93 per barrel, while that of Brent oil was $74.39 per barrel, up 3.8% from the previous close.
Tensions in the Middle East have escalated dramatically in the past week. Israel had continued to launch strikes on Iran-backed militia group Hezbollah and claimed to have dispatched ground troops in southern Lebanon.
The impact on the oil market is likely to be assessed in the next few sessions. Even as tensions have escalated in the Middle East, there have been no signs of risks to the supply of crude oil from the region so far.
Instead, the market has been focused on poor demand growth of crude oil from China and the potential rise in supply from the Organization of the Petroleum Exporting Countries and allies from December.
Markets to focus on key economic data releases
Investors will now look at the release of the unemployment rate in the US and the non-farm payrolls report on Friday.
On Thursday, the markets will also monitor the release of the unemployment claims report, which gives the number of people in the US filing for unemployment insurance for the first time during the last week.
US stocks and sentiments will depend on these data, which are used by the Federal Reserve to assess the health of the economy. Investors will be eager to see if the data could prompt the Fed to cut interest rates further by the end of this year.
The US Fed at its last policy meeting cut interest rates for the first time in four and a half years by 50 basis points to start its monetary policy easing cycle.
The post US markets plunge into red as defense stocks and oil prices surge appeared first on Invezz
