U.S. stocks plunged on Monday, erasing early gains spurred by robust retail sales data, as surging Treasury yields and escalating tensions in the Middle East between Iran and Israel weighed heavily on investor sentiment.
The S&P 500 and Nasdaq Composite closed sharply lower, continuing the market’s recent downturn. The S&P 500 suffered its biggest two-day drop since March 2023, falling 1.20% to 5,061.82. Meanwhile, the Nasdaq Composite declined 1.79% to 15,885.02.
The Dow Jones Industrial Average also retreated, shedding 0.65% or 248.13 points to close at 37,735.11.
Early in the trading session, the market saw a boost from stronger-than-expected retail sales in March and positive quarterly results from financial giants like Goldman Sachs and M&T Bank. Goldman Sachs shares rose 2.92% after beating Wall Street estimates, while M&T Bank surged 4.74% on an optimistic annual net interest income forecast.
However, the market mood soured as investors grew increasingly concerned about the hostilities between Israel and Iran. The tensions escalated over the weekend following a missile and drone attack by Iran in response to a suspected Israeli attack on its embassy.
Ken Polcari, managing partner at Kace Capital Advisors, commented on the market’s reaction to the Middle East tensions, saying, “All the geopolitical stuff is going to cause tension and anxiety in the market. The realization that rates are not going down anytime soon has got to be finally hitting home, that’s what the bond market is telling you, that rates are going to go higher.”
The benchmark 10-year U.S. Treasury note yield surged to its highest level since November, exacerbating concerns about rising interest rates.
Among individual stocks, Apple shares declined 2.19% following a report from research firm IDC indicating a 10% drop in the company’s smartphone shipments in the first quarter of 2024. Tesla also faced a setback, tumbling 5.6% after announcing layoffs of more than 10% of its global workforce.
Salesforce shares stumbled 7.28% amid reports of advanced talks to acquire Informatica, adding to the negative sentiment.
On the NYSE, decliners outnumbered advancers by a ratio of 5.1-to-1, while on the Nasdaq, the ratio was 3.5-to-1. The market breadth was reflected in the number of new highs and lows, with 39 new highs and 138 new lows on the NYSE and 37 new highs and 333 new lows on the Nasdaq.
Volume on U.S. exchanges was robust at 11.53 billion shares, compared to the 11.03 billion average over the last 20 trading days.
Looking ahead, investors will closely watch developments in the Middle East and monitor Treasury yields as they assess the market’s direction amid ongoing volatility. With uncertainty looming, market participants are bracing for further fluctuations in the days ahead.
