Wall Street Highlights: S&P 500 Falls, Nasdaq 100 Sees Worst Day In Weeks As Iran War Weighs On Traders

The technology-heavy benchmark dropped 1.3%, after sliding as much as 1.7%, to kick off September. The S&P 500 Index fell 0.7%, with seven of its 11 major industry groups falling. Consumer discretionary was the worst performer while energy led gains. An exchange-traded fund tracking chip names declined 2.1%.

Chipmakers, which have surged on the back of the artificial-intelligence investment boom, pared some of their initial losses during the session. Nvidia Corp. fell 1.5% Tuesday, following a 2.6% slide after the opening bell. Advanced Micro Devices Inc. fell 2.4% while Micron Technology Inc. declined 2.6%. SanDisk Corp. - among the best S&P 500 performers in 2026 - slumped 1.9%.

Much of the pressure on Wall Street stems from a deepening global bond selloff, with rising yields weighing on stocks, while Federal Reserve Chair Kevin Warsh's recent Jackson Hole speech has led traders to raise their bets on rate hikes this year. Oil prices rose on news the US launched a fresh wave of strikes against targets in Iran and the Islamic Republic said it retaliated, with WTI crude spiking above $90 a barrel.

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Yet even amid Tuesday's bond selloff, Wall Street's chief fear gauge - the Cboe Volatility Index, or VIX, remained around 16 - a level that doesn't typically signal market stress.

"Strong earnings and the promise of AI continue to put a floor under stocks broadly, limiting the magnitude of pullbacks," said Jeff Buchbinder, chief equity strategist at LPL Financial. "Rotations within equities rather than exits are limiting index moves. And we don't expect yields or oil to go much higher, an opinion seemingly shared by enough market participants to limit volatility even against a weak seasonal backdrop."

September has traditionally been the weakest month for US stock returns. Though the S&P 500 has bucked the trend in the last two years, the index has lost 0.8% on average in Septembers over the past three decades, data compiled by Bloomberg shows. That contrasts with an average 0.9% gain for the other 11 months.

"There is a lot of concern within equities about September, which is historically the market's worst month, and whether it makes sense to dial back exposure, at least until the FOMC decision," wrote Adam Crisafulli, founder of Vital Knowledge. 

Meanwhile, hawkish signals from the Fed have boosted traders' bets on a potential rate hike at the central bank's Sept. 16 policy decision. Investors will be eyeing the upcoming US nonfarm payrolls report on Friday for further monetary policy clarity. Higher energy prices have fueled already stubbornly high inflation, well above the Fed's 2% target. 

On Tuesday, global bond yields climbed back to the highest level in almost two decades. Tech companies are particularly susceptible to rising rates as many of them are valued on projected profits delivered years in the future. A basket tracking the so-called Magnificent Seven cohort fell 0.7%, led by declines in Tesla Inc., Amazon.com Inc. and Nvidia.

Apple Inc. rose 2.6% as the company's new chief executive John Ternus took the helm of the tech giant, ending Tim Cook's 15-year tenure.

ALSO READ: Fed Bets Strong? US Manufacturing Growth Cools, But Supply Pressures Put Team Warsh In Tight Spot

This week will also bring monthly manufacturing and services sector data, as well as earnings from Nvidia rival Broadcom Inc. Other tech companies reporting this week include Hewlett Packard Enterprise and Ciena Corp.