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The S&P 500 rebounded on Tuesday, recovering from Monday’s decline as easing oil prices and strong performance from technology shares lifted the market. The index gained 0.6%, while the Nasdaq Composite rose 1%, and the Dow Jones Industrial Average added 20 points.
Oil futures experienced a sharp drop of about 3% on Tuesday, driven by ongoing developments in the Middle East. Traders focused on Israel’s expected retaliation to recent missile attacks from Iran, as well as U.S. diplomatic efforts to prevent further escalation in the region. West Texas Intermediate oil had started the week trading above $77 per barrel but fell amid the uncertainty.
Bond yields have also been a point of concern for investors. On Monday, the 10-year Treasury yield climbed above 4%, marking its highest level since August 1. Rising bond yields have been a contributing factor to recent market volatility.
Technology stocks helped boost Tuesday’s recovery, with Nvidia and Apple each rising 3% and 2%, respectively. Meta Platforms, Tesla, and Microsoft also posted gains of at least 1%, fueling a strong performance in the tech sector.
Stocks have been volatile throughout October as fears of escalating conflict in the Middle East weigh on investors. The S&P 500 is down about 1.1% for the month, following a 2% gain in September. Monday’s session saw all major indexes close lower, contributing to the unease in the market.
Last week, a blockbuster jobs report briefly rallied the market, with the Dow even hitting an all-time closing high on Friday. However, that enthusiasm faded as investors weighed the potential impact on the Federal Reserve’s rate cut strategy. With a strong labor market, the Fed may be less likely to take aggressive action in cutting rates.
Larry Tentarelli, chief technical strategist of the Blue Chip Daily Trend Report, noted the market’s reaction to the data. “Initially, the market rallied on that really good economic news,” he said. “I think what you’ve got now is the market adjusting to higher bond yields.”
Trade Deficit Shrinks in August
In other economic news, the U.S. trade deficit fell by more than expected in August, dropping 10.8% to $70.4 billion. The decrease was driven by a surge in exports, which rose by $5.3 billion (2%), and a decline in imports, which fell by $3.2 billion (0.9%). The trade deficit with China also narrowed during this period. However, the year-to-date deficit remains 8.9% higher than the same period last year.