On Monday, U.S. stocks took a downturn as the likelihood of aggressive Federal Reserve rate cuts diminished following a significantly higher-than-anticipated rise in U.S. non-payroll employment for September.
Investors were also on standby for earnings reports from major banks and key economic data, such as consumer price and producer price inflation figures.
All major indices ended the day with considerable losses. The Dow dropped by 398.51 points, or 0.94%, to close at 41,954.24. The S&P 500 fell 55.13 points, or 0.96%, finishing at 5,695.94. The Nasdaq experienced a more severe decline, losing 213.95 points, or 1.18%, to settle at 17,923.90.
In light of Friday's positive jobs report, traders are now forecasting only a quarter-point reduction in interest rates at the Federal Reserve's upcoming policy announcement on November 7, with a slight possibility of the rate remaining unchanged.
Geopolitically, Israeli defense forces intensified airstrikes on Gaza and Beirut, marking the first anniversary of Hamas's cross-border attack on Israel, which ignited the ongoing Middle East conflict. According to Gaza's Hamas-run health ministry, airstrikes on a mosque and a repurposed school, now serving as refugee shelters, resulted in numerous casualties on Sunday. The Israeli military contends that Hamas militants were concealed there.
Several major companies saw declines, including Apple Inc., Microsoft Corporation, Alphabet, Amazon, Meta Platform, Berkshire Hathaway, Tesla, Walmart, Visa, Procter & Gamble, Netflix, Coca-Cola, Salesforce, Merck, Accenture, Walt Disney, Nike, KKR, and ADP, with losses ranging from 1% to 4%. In contrast, Pfizer's stock increased by over 2%, and Abbott, IBM, Eli Lilly & Co., NVIDIA Corporation, and Exxon Mobil also ended the day on a positive note.
Asian markets rallied on Monday, and the dollar reached a new seven-week high against the yen, driven by robust U.S. job data that indicated economic resilience yet led traders to scale back expectations for substantial Federal Reserve interest-rate reductions.
Major European markets closed on a positive note, bolstered by strong performances in Asian markets and the recent encouraging U.S. jobs data, which helped maintain investor optimism. Nonetheless, concerns about escalating tensions in the Middle East and anticipatory caution regarding crucial upcoming economic data, including U.S. consumer price inflation figures, tempered market gains.