US stocks experienced a significant decline on Thursday, with the S&P 500 index posting its largest single-day drop since January. The market was weighed down by uncertainties surrounding the potential for a ceasefire agreement between the US and Iran, coupled with rising US Treasury yields.
The S&P 500 recorded its most substantial daily decline since the outbreak of the Iran war. The index fell by 1.7%, closing at its lowest level since last September. Eight out of its eleven sectors ended the session in negative territory.
Dragged down by megacap stocks such as NVIDIA and Meta Platforms Inc, the Nasdaq 100 index dropped 2.4%, approaching a seven-month low.
Stock index futures pared some of their losses after regular trading hours, following an announcement from former President Trump that he was delaying a deadline for Iran. He stated that negotiations with Tehran were "progressing very smoothly."
The benchmark 10-year US Treasury yield climbed to 4.41% after a relatively weak auction for US government debt. Meanwhile, Brent crude oil rose to $107 per barrel, and the VIX volatility index, a measure of market fear, increased to around 27.
Traders are carefully assessing the latest statements from the US and Iran to gauge whether a ceasefire is possible in the conflict that has persisted for nearly a month.
Later on Thursday, Trump announced an extension of the deadline for Iran to reopen the Strait of Hormuz, moving it to April 6.
However, earlier in the day, Trump had threatened to escalate military actions and expressed uncertainty about reaching a deal with Iran, which added to the pressure on equities.
An index tracking the "Magnificent Seven" major US tech stocks fell approximately 3%, closing at its lowest point since late August. Meta's stock was among the worst performers, as investors grappled with long-term uncertainties related to legal rulings concerning social media addiction.
Melissa Brown, Head of Investment Decision Research at Simcorp, noted that the rise in the 10-year yield and the prospect of a prolonged closure of the Strait of Hormuz are negatively impacting large-cap tech stocks, which were previously viewed as safe-haven assets during the war.
According to a report from the semi-official Fars News Agency, Iran's parliament is drafting a bill that would impose fees on vessels transiting the Strait of Hormuz in exchange for security guarantees.
Rob Kapito, President of BlackRock, suggested that investors may be underestimating the risks posed by the Iran war. He indicated that even if the conflict ends soon, these risks could continue to pressure economic growth and push inflation higher.
At the market close, the S&P 500 was down 1.7% at 6,477.16 points. The Dow Jones Industrial Average fell 1% to 45,960.11 points. The Nasdaq Composite Index declined 2.4% to 21,408.08 points. The Nasdaq 100 Index dropped 2.4% to 23,586.99 points. The Russell 2000 Index decreased 1.7% to 2,493.321 points.
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