Wall Street experienced a downward trend on Thursday, driven largely by significant losses in major technology stocks such as Micron Technology and Tesla. Investor sentiment turned cautious amid growing concerns over inflation, which has been exacerbated by surging oil prices linked to escalating geopolitical tensions in the Middle East. This atmosphere of uncertainty has dampened hopes for any near-term cuts in interest rates.
The market’s apprehension was further fueled by Federal Reserve Chair Jerome Powell’s remarks on Wednesday, where he emphasized the uncertain economic outlook. Powell’s comments came against the backdrop of a conflict involving the United States, Israel, and Iran, which has caused energy prices to spike sharply. These developments have heightened fears that inflationary pressures could persist, complicating the Federal Reserve’s policy decisions. As anticipated, the Fed opted to maintain interest rates at their current levels during its latest meeting.
Looking ahead, futures markets suggest that traders do not expect any reductions in interest rates before the middle of 2027. This sentiment is reflected in the CME’s FedWatch tool, which tracks market expectations for Federal Reserve policy moves. Similarly, other major central banks, including the Bank of England and the European Central Bank, also chose to keep their rates steady. Both institutions highlighted the uncertainty arising from the ongoing conflict in the Middle East as a key factor influencing their cautious stance.
Mike Dickson, head of research and quantitative strategies at Horizon Investments in Charlotte, North Carolina, described the situation as a “real inflation risk.” He noted that while the market is not anticipating any further rate hikes, it has effectively ruled out any rate cuts for the remainder of the year. This shift in expectations reflects a growing consensus that inflationary pressures remain a significant concern for policymakers.
The geopolitical tensions have had a direct impact on energy markets, with attacks targeting Iran’s South Pars gas field, the world’s largest gas processing facility in Qatar, and oil refineries in Saudi Arabia and Kuwait. These incidents have driven Brent crude oil prices above $119 per barrel, intensifying inflation worries globally. The ripple effects of these price increases are being closely monitored by investors, who fear that sustained high energy costs could undermine economic growth.
On the stock market front, the small-cap Russell 2000 index edged down by 0.1%, briefly dipping more than 10% below its record closing high set on January 22. Micron Technology’s shares fell 3.3% after the company’s quarterly forecast failed to meet investor expectations, despite the stock having surged 56% this year due to strong demand linked to artificial intelligence advancements. Tesla’s stock also declined by 2.8%, weighed down by an intensified investigation from the National Highway Traffic Safety Administration into 3.2 million vehicles equipped with Tesla’s Full Self-Driving driver-assistance system. Regulators are concerned that the system may not adequately detect or alert drivers in conditions of poor visibility.
Overall market indices reflected the cautious mood, with the S&P 500 dropping 0.68% to 6,579.33 points, the Nasdaq Composite falling 0.77% to 21,982.25 points, and the Dow Jones Industrial Average retreating 0.86% to 45,829.71 points. Notably, all three major indices were trading below their 200-day moving averages, signaling a loss of upward momentum. The S&P 500 has declined approximately 4% so far in 2026, reaching its lowest levels in four months.
Sector performance was broadly negative, with 10 out of 11 S&P 500 sectors posting losses on Thursday. The materials sector led the downturn, falling 2.21%, followed by a 1.38% decline in consumer discretionary stocks. Meanwhile, the CBOE Volatility Index, often referred to as Wall Street’s fear gauge, inched up by 0.5 points to 24.6, indicating increased market nervousness. Precious metals prices also dropped, negatively impacting mining companies such as Newmont and Freeport-McMoRan, which fell 8.6% and 4.8%, respectively.
Adding to the mixed economic signals, data released on Thursday revealed that weekly jobless claims unexpectedly decreased last week. This suggests that the labor market remains resilient, with steady employment conditions and a potential rebound in job growth anticipated for March. Despite this positive labor data, the overall market breadth was weak, with declining stocks outnumbering advancing ones by a ratio of nearly 3-to-1 within the S&P 500. The index recorded 16 new highs and 26 new lows, while the Nasdaq saw 26 new highs contrasted by 259 new lows, underscoring the uneven market environment.
