S&P 500, Nasdaq hit over 6-month lows as ME tensions drag on markets

NEW YORK: The S&P 500 and the Nasdaq dropped to their lowest levels in more than six months on Friday, with technology stocks leading declines, as the month-long Middle East war weighed on investor sentiment.

US President Donald Trump gave Iran another 10 days to reopen the Strait of Hormuz or face the destruction of its energy plants, after Iran rejected his proposals to end the war he launched together with Israel.

The postponement did not calm markets as investors were skeptical about the two sides reaching an agreement. Oil prices gained more than 2 percent.

The S&P 500 and the Nasdaq stayed on track for their fifth week of losses, while the Dow was set to end the week little changed.

“What you’re talking about here is a level of uncertainty in the extreme… The fog of war has been much denser than in any conflict going back 50-60 years,” said Bill Mann, chief investment strategist, Motley Fool Asset Management.

The CBOE Volatility Index, considered Wall Street’s fear gauge, was up 1.57 points at 29.01.

At 11:40 a.m. ET, the Dow Jones Industrial Average fell 305.57 points, or 0.66 percent, to 45,651.29, the S&P 500 was down 45.10 points, or 0.70 percent, to 6,432.06, and the Nasdaq Composite lost 236.47 points, or 1.10 percent, to 21,171.61.

The S&P 500technology sector was the biggest loser, down 0.9 percent, with Nvidia and Microsoft shedding 1 percent and 1.7 percent, respectively.

Software shares came under renewed selling pressure with the iShares Expanded Tech-Software sector ETF falling 3.4 percent to a more than one-month low.

A 1.1 percent loss for Alphabet and a 3.5 percent decline in Meta Platforms’ shares weighed on the S&P 500 communication services index, which shed 1.3 percent.

“Certain components of the market have been hit really hard. And a lot of that has to do with the fact that we’re not sure who’s a beneficiary from AI and who is going to be consumed by AI,” said Mann.

Consumer discretionary stocks lost 2 percent. Cruise-operator Carnival Corp was down about 4 percent after cutting its annual adjusted profit forecast.

On Thursday, the Nasdaq ended more than 10 percent lower from its record close, confirming it had been in correction territory. The Russell 2000, which was the first on the correction path, confirmed it last Friday.

The surge in oil prices as a result of the Iran war has brought inflation fears to the forefront, complicating the future rate-cut path for central banks.

Money market participants are not pricing in any easing from the US Federal Reserve this year, compared with two cuts anticipated before the conflict broke out, according to CME’s FedWatch Group. Expectations of a rate hike in December last stood at 32 percent.

US consumer sentiment eased to a three-month low in March, raising concerns about the economy due to the Middle East war.

Philadelphia Fed President Anna Paulson acknowledged the risks to the economy from the war, but did not specify what it meant for monetary policy in the near term.

Unity Software’s shares jumped 10.5 percent after the maker of videogame software reported first-quarter preliminary revenue above analysts’ estimates.

Declining issues outnumbered advancers by a 1.85-to-1 ratio on the NYSE and by a 2.5-to-1 ratio on the Nasdaq.

The S&P 500 posted 21 new 52-week highs and 16 new lows, while the Nasdaq Composite recorded 21 new highs and 262 new lows.