NEW YORK (AP) — The U.S. stock market fell for a third consecutive session on Tuesday, surrendering more of its record-setting advance as high inflation rattled the bond market and wild swings in oil prices fueled by the Iran war continued to weigh on investor sentiment.
The S&P 500 slipped 0.7%, the Dow Jones Industrial Average dropped 322 points, or 0.6%, and the Nasdaq composite declined 0.8%. The losses deepened a pullback that began late last week after the benchmark indexes set all-time highs.
The sell-off was led by technology stocks, whose huge gains driven by enthusiasm for artificial intelligence have drawn criticism that they have become too expensive. This weakness rippled overseas, dragging South Korea’s Kospi down 3.3%. In Europe, Germany’s DAX managed a 0.4% gain.
Oil prices were volatile again, the latest in a yo-yo pattern that has defined trading since the Iran war escalated. Markets remain uncertain about how long Iran will keep the Strait of Hormuz closed to tankers, a critical choke point for global crude shipments that has been partially blocked since hostilities intensified. The disruption has added to anxiety that the war will sap economic growth and keep inflation — particularly for energy — elevated.
Bond markets are reflecting those inflation fears. Yields have pushed higher, making fixed-income investments more attractive relative to equities and raising the cost of borrowing for companies and consumers. Higher yields tend to pressure stocks, particularly those with high valuations like technology shares.
The combination of sticky inflation, rising bond yields, and continued oil supply uncertainty creates a difficult environment for equities, which only recently were trading at record levels. Investors are now weighing the possibility that the economic consequences of the conflict and the Federal Reserve’s inflation battle could erode corporate earnings.