Wall Street rattled by Middle East tensions, energy shares jump

(Reuters) – U.S. stocks fell for a second session on Monday, led by financial and technology stocks, as escalating tensions between the United States and Iran pushed investors toward safe-haven assets such as gold and government bonds.

After ending 2019 on a strong note, Wall Street’s main indexes have been knocked off record levels as the killing of a top Iranian general by the United States last week raised the threat of a new conflagration in the Middle East.

Tehran has threatened to avenge the killing of its commander, Qassem Soleimani, while President Donald Trump has warned that the United States would strike back, “perhaps in a disproportionate manner”, if Iran retaliated.

Investors sold some of 2019’s star performers including technology stocks .SPLRCT, which fell 0.3%. Apple Inc (AAPL.O) was down 0.4% after brokerage Needham downgraded to “buy” from “strong buy”, while Microsoft (MSFT.O) also dipped 0.4%.

The Philadelphia semiconductor index .SOX, which surged about 60% last year, was down 0.9%.

Big lenders, including J.P. Morgan (JPM.N), Bank of America (BAC.N) and Morgan Stanley (MS.N), were down between 0.5% and 1.3%, as U.S. Treasury yields fell. “Tensions in Middle East raise concerns for investors following what has been a really great period in markets,” said Rick Meckler, partner at Cherry Lane Investments in New Vernon, New Jersey. “Certainly, some are using this as a reason to step back a little bit.”

The energy index .SPNY rose 0.3% as Brent crude futures LCOc1 topped $70 per barrel after Trump also threatened sanctions on Iraq if U.S. troops were forced to withdraw from the country.

At 10:03 a.m. ET, the Dow Jones Industrial Average .DJI was down 122.97 points, or 0.43%, at 28,511.91, and the S&P 500 .SPX was down 8.01 points, or 0.25%, at 3,226.84. The Nasdaq Composite .IXIC was down 22.75 points, or 0.25%, at 8,998.02.

The latest geopolitical concerns have added to fears that anemic earnings growth and a less supportive Federal Reserve could derail the longest bull run in U.S. equities in 2020.

“Until we get to the next earnings season, absent any big news, investors are probably reluctant to commit a lot of new capital at these levels, but are also not interested in pulling back, which leaves markets a bit range-bound,” said Meckler.

Shares of Boeing Co (BA.N) dropped 1.1%. A Wall Street Journal report said the planemaker was considering plans to raise more debt to bolster its finances after the grounding of its 737 MAX jet.

Among the few bright spots were the utilities index .SPLRCU, considered a bond-proxy, and the communication services index .SPLRCL, up 0.4%, lifted by a rating upgrade for Alphabet (GOOG.O).

Declining issues outnumbered advancers for a 2.01-to-1 ratio on the NYSE and a 2.65-to-1 ratio on the Nasdaq.

The S&P index recorded 8 new 52-week highs and one new low, while the Nasdaq recorded 22 new highs and 18 new lows.