After the SOTU address on Tuesday, the stock market plummeted. The Dow Jones Industrial Average=.DJI retreated 299.29 points, to 29944.69, or 0.70%. Combined with the markets’ continued volatility, this has caused this drop. Increasingly challenging geopolitical tensions, alongside the approach of another Federal Reserve decision on interest rates, are complicating the environment even further. At last count, Dow futures have declined even more, now off 45 points, or 0.1%.
ESG investors particularly watch what’s happening in Middle East. This increased focus comes in the wake of President Donald Trump’s threat to Iranian president Ebrahim Raisi on his Truth Social app. According to current and former administration officials speaking to NBC News, President Trump is considering various scenarios when it comes to Iran. One of those choices may include a military strike. This change has introduced an additional layer of uncertainty to an already shaky market.
The U.S. central bank is all but certain to hold interest rates steady in its next meeting. Investors will be closely monitoring comments from Fed Chair Jerome Powell following the meeting for any indications of future monetary policy directions.
Middle East tensions remain the elephant on every investor’s short list. Adam Crisafulli, founder of Vital Knowledge, noted that “there’s not a lot of capacity priced in to absorb all this uncertainty.” Given the current state of the market, he stressed that even before the recent escalations in the Middle East, markets were already exposed. Elevated valuations and a lack of flexible capital were real risks.
Beyond political and geopolitical concerns the stock market is tanking on volatility in oil prices. Oil futures closed the day up well over 4%, which added to the pressure on U.S. equities. The global benchmark Brent crude leapt more than 5% in after-hours trading.
On Tuesday, the broad S&P 500 index declined by 0.84%, with the tech-heavy Nasdaq Composite leading the retreat with a drop of 0.91%. Futures for both indices were down by over 0.1%. Just recently, market analysts have raised alarm over the fragility of equity markets in the face of these headwinds.
The stock market will be shuttered on Thursday in recognition of the Juneteenth holiday. This introduces a unique investor boogeyman to complicate the already difficult navigation of these stormy waters for investors. On Wednesday, we look forward to data on May’s housing starts and preliminary building permits. This new information has the potential to greatly shift market sentiment in the short term.