On Tuesday afternoon, U.S. equity indices experienced a downturn as volatility surged in response to reports of a missile attack launched by Iran against Israel. This sparked a notable increase in oil and gold futures, with West Texas Intermediate crude oil advancing by 5.3% to $71.81 per barrel and gold climbing 1.2% to $2,692.32 per ounce.
The geopolitical developments have heightened concerns over regional stability, leading to significant movements in the financial markets. The Nasdaq Composite index fell by 2.1%, closing at 17,807.1, while the S&P 500 and the Dow Jones Industrial Average posted declines of 1.3% to 5,688.3 and 0.7% to 42,029.4, respectively.
Most sectors experienced intraday declines, with the technology and consumer discretionary sectors leading the way down. Notably, energy and utilities sectors defied the trend, posting gains amidst the escalating tensions. The CBOE Volatility Index, often referred to as the fear gauge among investors, surged by 21% to reach 20.29 as fears of geopolitical instability mounted.
Concurrently, most U.S. Treasury yields declined, with the 10-year yield falling 8.4 basis points to 3.72%, and the two-year rate decreasing by 5.3 basis points to 3.49%. Furthermore, the U.S. Dollar Index increased by 0.6% to hit 101.36, reflecting shifts in investor sentiment. Adding to the financial landscape, a strike initiated by the International Longshoremen's Association commenced overnight, leading to the closure of ports from Maine to Texas.
Workers are advocating for significant pay raises and protections against automation, which has resulted in an interruption of operations at ports that account for approximately 57% of U.S. container volume. This strike carries significant implications for supply chains, particularly with the upcoming U.S.
presidential election and holiday season. Estimates suggest that the shutdown could result in a weekly economic impact of $3.78 billion. In terms of economic indicators, U.S. job openings increased to 8.04 million in August, surpassing expectations of 7.673 million as reported in a Bloomberg survey, and showing an increase from July's 7.711 million.
However, hiring witnessed a decrease, with 5.317 million new jobs added compared to 5.416 million in July, leading to a slight drop in the hiring rate from 3.4% to 3.3%. Jefferies noted that while the spike in job openings is modest, it indicates a readjustment in the labor market toward stability without exerting upward pressure on inflation. The jobs report was mixed, with job openings rising but hiring declining, which Oxford Economics regarded as less concerning due to the low levels of layoffs.
The prevailing view among analysts suggests an anticipated reduction in interest rates, with speculation for a 25 basis point cut in November. Although the latest JOLTS data may not be sufficient to forecast a 50 basis point reduction, the risk is seen as skewed in that direction. Additionally, the Institute for Supply Management's manufacturing index for the U.S.
remained unchanged at a reading of 47.2 in September, which did not align with expectations for an increase to 47.5. In the corporate arena, APA Corp. announced that its subsidiary achieved a positive final investment decision for the initial oil development at Block 58 offshore Suriname, with a total investment estimated at $10.5 billion and first oil production expected in 2028.
Consequently, APA shares climbed by 4.5%, marking the second-largest gain within the S&P 500..