By Shashwat Chauhan and Ankika Biswas
(Reuters) – The S&P 500 and the Nasdaq fell on Monday as a deepening conflict between Israel and the Palestinian Islamist group Hamas roiled global markets and pushed investors toward safe-haven assets, while crude prices jumped over 3%.
Israel said its troops backed by helicopters had killed a number of armed infiltrators entering the country from Lebanon, raising fears fighting could spread two days after Hamas gunmen burst in from Gaza on a deadly rampage.
The Israeli military said it had called up an unprecedented 300,000 reservists and was imposing a total blockade of the Gaza Strip, signs it could be planning a ground assault.
U.S. Defense Secretary Lloyd Austin said the United States will send multiple military ships and aircraft closer to Israel as a show of support.
At 9:40 a.m. ET, the Dow Jones Industrial Average was down 12.14 points, or 0.04%, at 33,395.44, the S&P 500 was down 14.98 points, or 0.35%, at 4,293.52, and the Nasdaq Composite was down 127.02 points, or 0.95%, at 13,304.33.
The CBOE volatility index, Wall Street’s “fear gauge”, also rose to 18.59, reflecting investor anxiety.
Major technology stocks Apple, Microsoft Alphabet, Nvidia and Amazon.com fell between 0.5% and 2.3%.
Traditional safe-haven assets including gold and the U.S. dollar gained, while crude prices increased.
“We expect short-term volatility in the stock market and oil market as investors digest the heightened tensions in the Middle East,” said James Demmert, chief investment officer, Main Street Research.
United Airlines, Delta Air Lines and American Airlines suspended direct flights to Tel Aviv. The airlines’ shares were down around 5% each, dragging the S&P 500 Passenger Airlines index 4.4% lower.
Energy was the top S&P 500 sector gainer with a near 3% rise, while consumer discretionary and information technology were the worst hit.
Defense companies Northrop Grumman, RTX, General Dynamics and Lockheed Martin rose between 5.5% and 8.5%.
Exchange-traded funds exposed to Israel including iShares MSCI Israel ETF and the ARK Israel Innovative Technology ETF slid 7.6% and 4.4%, respectively.
For the week, key inflation readings including September’s producer price and consumer price indexes, as well as the Federal Reserve’s September meeting minutes will be in focus.
Dallas Fed President Lorie Logan said the recent rise in long-term U.S. Treasury yields and tighter financial conditions more generally could mean less need for the U.S. central bank to raise interest rates further.
The U.S. bond market was shut on Monday for Columbus Day.
Focus will also be on the upcoming quarterly earnings from major banks including JPMorgan Chase, Wells Fargo, Citigroup as well as asset manager BlackRock.
Tesla shed 2.5% as data showed the company’s China-made EV sales volume for September decreased 10.9% from a year ago.
Declining issues outnumbered advancers for a 1.45-to-1 ratio on the NYSE and a 2.40-to-1 ratio on the Nasdaq.
The S&P index recorded four new 52-week highs and six new lows, while the Nasdaq recorded 16 new highs and 113 new lows.
(Reporting by Shashwat Chauhan and Ankika Biswas in Bengaluru; Editing by Arun Koyyur and Shounak Dasgupta)
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