US stocks retreat amid renewed inflation concerns

Wall Street stocks retreated early Tuesday as analysts pointed to angst over inflation pressures as the prolonged Middle East war kept oil prices high.

Equities had until recently “shrugged off the effects of higher yields”, Interactive Brokers’ Steve Sosnick said of increases in bond yields.

“After pretending this was not a problem, I think (the market) has now decided that higher yields are in fact a problem,” Sosnick said. “But we aren’t seeing panic or anything like that.”

About 10 minutes into trading, the Dow Jones Industrial Average was down 0.8 per cent at 49,289.53.

The broad-based S&P 500 dropped 0.4 per cent to 7,372.49, while the tech-rich Nasdaq Composite Index shed 0.3 per cent to 26,024.82.

Iran’s army warned on Tuesday it would “open new fronts” against the United States if it resumed attacks after President Donald Trump said he had held off launching a new offensive in hopes of striking a deal.

Major US indices were also under pressure on Monday as semiconductor equities sold off a fraction of their recent gains. Sosnick described the dynamic as profit-taking ahead of Wednesday’s release of Nvidia’s earnings.

Rising government bond yields also weighed on sentiment, with the yield on 30-year US Treasuries hitting its highest level in nearly 19 years. The move indicated growing market unease over inflation, energy prices and fiscal worries.

President Trump said he held off a major new assault against Tehran as he saw hopes for securing an agreement to end the conflict, which was sparked by US and Israeli strikes on Iran at the end of February.

Stocks did not get much of a boost from Trump’s announcement, with Wall Street’s major indices lower in late morning trading.

European indices ended the day mixed.

“Investors are showing relief that tensions haven’t escalated,” said Russ Mould, investment director at AJ Bell.

He added, however, that “oil prices remain at high enough levels to weigh on the global economy.”