Highlights
Stocks weakened Tuesday after President Trump threatened Iran and reports circulated that the US was considering joining Israel's attacks on the country. The Dow Jones industrial average lost 0.7 percent, the S&P 500 fell 0.8 percent, and the Nasdaq was off 0.9 percent. US Treasury yields declined while oil prices soared and the dollar rose.
In social media posts, Trump referred to the Israeli attacks on Iran as we, called for Iran's unconditional surrender and said we know exactly where Ayatollah Ali Khamenei, Iran's leader, is hiding, but we are not going to take him out (kill!), at least for now. Trump and his advisers were reportedly meeting Tuesday afternoon to consider whether the US would use its huge bunker-busting bombs to attack Iran's underground nuclear facilities at Fordow, as Israel has requested.
Earlier Tuesday, markets were encouraged by reports that Iran was reaching out to restart talks with the US over its nuclear program, which suggested the war was likely to end soon with minimal implications for markets and the global economy. That positive sentiment gave way to risk aversion after Trump's comments. The market also focused in the morning on weak economic reports, including softer than expected retail sales, industrial production and homebuilder sentiment, which all suggested the economy was eroding through the second quarter. That renewed speculation about possible Federal Reserve rate cuts this year.
Among sectors, big technology lagged with Tesla the featured decliner. Other lagging sectors included pharma, travel & leisure, solar stocks, regional banks, machinery and rails. Best performers included aerospace & defense, energy, consumer staples, steel & aluminum, and restaurant chains.
In social media posts, Trump referred to the Israeli attacks on Iran as we, called for Iran's unconditional surrender and said we know exactly where Ayatollah Ali Khamenei, Iran's leader, is hiding, but we are not going to take him out (kill!), at least for now. Trump and his advisers were reportedly meeting Tuesday afternoon to consider whether the US would use its huge bunker-busting bombs to attack Iran's underground nuclear facilities at Fordow, as Israel has requested.
Earlier Tuesday, markets were encouraged by reports that Iran was reaching out to restart talks with the US over its nuclear program, which suggested the war was likely to end soon with minimal implications for markets and the global economy. That positive sentiment gave way to risk aversion after Trump's comments. The market also focused in the morning on weak economic reports, including softer than expected retail sales, industrial production and homebuilder sentiment, which all suggested the economy was eroding through the second quarter. That renewed speculation about possible Federal Reserve rate cuts this year.
Among sectors, big technology lagged with Tesla the featured decliner. Other lagging sectors included pharma, travel & leisure, solar stocks, regional banks, machinery and rails. Best performers included aerospace & defense, energy, consumer staples, steel & aluminum, and restaurant chains.
Definition
Market Reflections track market reaction to the trading day's major events. Economic data, policymaker speeches, and company news are featured in this report as well as key indexes and financial instruments.
Description
Understanding why markets respond as they do is fundamental for an investor. Market Reflections help explain how the day's events, news, and data impact the outlook for the economy and for market prices.
