Dow drops more than 1,000 points, S&P 500 and Nasdaq sink as oil surges amid war worries

The U.S. stock market fell into the deep red on Tuesday after the United States and Israel launched a new wave of attacks against Iran, and the broader dispute raised nerves about a possible regional war.

The Nasdaq Composite ( ^IXIC ) led the retreat, losing nearly 1.9%, while the S&P 500 ( ^GSPC ) and the Dow Jones Industrial Average ( ^DJI ) saw slight declines of 1.6% and 1.7%, respectively, as worries about rising oil prices and rising oil prices eased. production

Crude oil prices (BZ=F, CL=F) rebounded as key supply routes remained blocked and Iran’s attacks expanded to include the Middle East’s energy infrastructure, rising more than 6% on rising inflation concerns. Meanwhile, gold (GC=F) fell after a four-day rally, down 2%.

In the corporate world, shares in Target ( TGT ) rose after the retail giant posted holiday and full-year sales that met Wall Street estimates.

It’s a sea of ​​red in foreign stock markets and foreign exchange land this morning, as my colleague Jack Connelly wrote. Investors’ high energy costs, low risk appetite, and high dollar prices have deprived many of the profitable trades of the past year.

After a good run on Friday and closed for the Monday holiday, the iShares MSCI South Korea ETF ( EWY ) plunged 12% this morning — the biggest since 2020. (That’s still more than triple the Independence Day lows since April 2025.)

Korea is heavily benefiting the chip business, which is also a given this morning (to the downside).

Micron ( MU ), SanDisk ( SNDK ), and Lumentime ( LITE ) are off 6%, while Western Digital ( WDC ), ASML ( ASML ), and Taiwan Semiconductor ( TSM ) are down 5%.

With that said, the Philly Semiconductor Index (SOX) is set to open about 8% off its record high, just above the 50-day moving average at 336. It remains to be seen as the day progresses.

Global currencies were broadly unchanged this morning as foreign exchange traders fell on the effects of what has largely turned out to be a supply-side inflation shock.

The dollar is gaining not only against the index but against a basket of other currencies as the market assesses that the US is facing a direct physical supply disruption, though not an exemption.

Meanwhile, European currencies are facing a blow in the foreign exchange market. Europe is heavily reliant on imported liquefied natural gas (LNG), including significant flows from Qatar, and the country’s LNG production shutdown has pushed the European Title Transfer Facility (TTF) gas price (TTF=F) up more than 85% over the past five sessions.

Like a typical geopolitical shock that drives up government bonds, this event saw yields rise as traders traded in higher inflation and central bank rate cuts.

Emerging market currencies linked to energy imports are also under pressure. The Egyptian pound breached the key 50-per-dollar sympathy level as investors braced for prolonged regional instability, and forecasts of a South African interest rate hike later this month were boosted on Friday after predictions that the South African central bank will cut rates at its next March meeting.

Best Buy ( BBY ) stock rose as much as 12% in premarket trading despite the retailer reporting a surprise sales decline in its key holiday shopping season.

Same-store sales fell 0.8% in the fourth quarter, the company said Tuesday. Wall Street had expected a 0.2% increase after two straight quarters of positive growth.

“Our data sources show that our overall market share was minimally flat, indicating somewhat softer consumer demand for our industry during the holiday quarter,” Best Buy CEO Corey Berry said in a statement.

Best Buy expects first-quarter same-store sales to return to growth, up 1%.

Revenue for the fourth quarter totaled $13.81 billion, short of Wall Street expectations of $13.88 billion, according to Bloomberg consensus data. Adjusted earnings per share rose to $2.61, exceeding the $2.46 the Street had forecast. Best Buy’s stock is down more than 30% in the past year.

For the full year, revenue came in at $41.69 billion, just below Wall Street’s forecast of $41.76 billion. Adjusted earnings per share came in at $6.43, $0.12 above Wall Street estimates for $6.31.

For the year, same-store sales rose 0.5%, less than the 0.9% increase Wall Street was looking for.

Today there will be more attention and status for the target (TGT). At the same time the retailer releases its earnings, it holds its annual investor day on its Minneapolis patio.

I think the company — now led by new CEO Michael Fedlak, and an almost entirely new leadership team — will improve its store investment plans and say that 2025 results will be the low-water mark.

Execs will probably use today’s earnings beat and positive sales in February to help their pitch to Wall Street (and the broader investors who have been badly burned by stocks over the past five years).

All that said, I’m not buying this dish, and neither should you. The goal must remain in the penalty box and “Prove it” is stock. This means that until it starts racking up positive quarters, you don’t just buy the stock and continue to support Walmart ( WMT ) or Costco ( COST ) on a pullback.

Here’s what I didn’t like about Target’s quarterback to illustrate my point:

As I mentioned in an earlier post, it is important to keep in mind the history of the market in the context of war.

While the rise in oil (BZ=F, CL=F) prices looks painful (and it is), we haven’t seen the worst-case scenario.

This is what Deutsche Bank said in this chart:

You might be wondering why we’re seeing Ford ( F ) and General Motors ( GM ) outperform the broader market this week. Of course, there is the thought that with stocks dwindling and us at war, people will stop buying the more expensive cars and trucks that every automaker continues to hawk.

But keep this in mind. Both automakers have built a strong focus on electric vehicles and passenger cars, each ideal in an environment of constant gas prices (which we’re seeing). Ford in particular really plays its pickup truck bonafide.

Another hike in oil prices (CL=F, BZ=F) did not help market sentiment this morning.

But remember with this background, markets will take their primary cues from the leaders during the war (Trump, Hegseth, etc.).

This helpful review from Mizuho today:

A good point from JP Morgan on banking stocks this morning: Look for a first-quarter uptick in banks’ trading business from increased volatility in many markets from the war on Iran.

JPMorgan says (emphasis added):

Their top US names for trading from this prospect include Goldman Sachs ( GS ) and Morgan Stanley ( MS ), given their extensive trading operations.

Goldman Sachs is eyeing a rise in inflation coming soon, given that oil prices rise.

Its team notes that a 10% increase in crude oil prices typically raises “core” inflation — which strips out volatile energy and food prices — by 4 basis points and headline inflation by 20-30 basis points.

It is good in these moments, when the market is hit in the face, to set some level.

Retrospectives about the development of war news are common. But just keep this chart from Keith Lerner at Trust in mind.

Since 2009, the S&P 500 (^GSPC) has returned more than 5% more than 30 times. This suggests that stocks may end up resisting bad news.