U.S. and Canadian stocks finished with losses on Tuesday as the Israel-Iran conflict raged on for a fifth day and kept investor anxiety high. A jump in oil prices helped to moderate losses in the S&P/TSX Composite Index.
The Cboe Volatility index, an indicator of investor unease, rose to end at 21.6, its highest close since May 23.
Reuters reported, citing three U.S. officials, that the U.S. military is deploying more fighter aircraft to the Middle East and extending the deployment of other warplanes. President Donald Trump called for Iran’s “unconditional surrender.” The war began on Friday when Israel attacked Iran’s nuclear facilities.
“We’re in a period where visibility is not great, uncertainty is high, and the wall of worry is under construction,” said Terry Sandven, chief equity strategist at U.S. Bank Wealth Management in Minneapolis, Minnesota.
Besides the Middle East conflict, investors are closely watching for any new information on Trump’s tariffs, his tax-cut bill and U.S. interest rates. A Federal Reserve monetary policy decision is expected on Wednesday, with policymakers widely seen leaving rates unchanged.
Data Tuesday showed U.S. retail sales dropped more than expected in May, while factory production barely rose last month.
“The resilient consumer is getting skittish,” said Brian Jacobsen, chief economist at Annex Wealth Management.
All of the major S&P 500 sectors were lower except for energy, which gained along with sharply higher oil prices. Investors have worried that the conflict could create bottlenecks for oil exports from the oil-rich Middle East.
Defense shares also rose, including Lockheed Martin, which was up 2.6%.
The Dow Jones Industrial Average fell 299.29 points, or 0.70%, to 42,215.80, the S&P 500 lost 50.39 points, or 0.84%, to 5,982.72 and the Nasdaq Composite lost 180.12 points, or 0.91%, to 19,521.09.
Solar stocks plunged after U.S. Senate Republicans late on Monday unveiled proposed changes to Trump’s tax-cut bill, including a phase-out of solar, wind and energy tax credits by 2028. Shares of Enphase Energy fell 24% and Sunrun dropped 40%.
The TSX closed down 0.10% at 26,541.39. The commodity-heavy benchmark index had briefly hit a record high on Monday as investors hoped that the Middle East tensions would be contained and the G7 meeting in Canada would be productive.
Energy stocks led the gains on the TSX. U.S. crude settled 4.46% higher at US$74.97 a barrel.
“If anything, it (the conflict) could lead oil prices higher, but both Canada and U.S. are big oil producers, so it might actually end up benefiting us in the long term,” said Jay Bala, co-founder and senior portfolio manager at AIP Asset Management.
Industrials and health care weighed most on TSX, with a 0.7% and 2.4% declines, respectively.
Declining issues outnumbered advancers by a 2.07-to-1 ratio on the NYSE. There were 97 new highs and 77 new lows on the NYSE. On the Nasdaq, 1,325 stocks rose and 3,130 fell as declining issues outnumbered advancers by a 2.36-to-1 ratio. Volume on U.S. exchanges was 15.71 billion shares, compared with the 17.98 billion average for the full session over the last 20 trading days.
Reuters, Globe staff