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What you need to know today
Shaken by geopolitical tensions
U.S. stocks fell on fears over growing geopolitical tensions. The S&P 500 slipped 0.93%, the Dow Jones Industrial Average lost 0.41% and the Nasdaq Composite retreated 1.53%. The pan-European Stoxx 600 dropped 0.38%. Meanwhile, euro zone inflation fell to 1.8% in September, according to flash data from Eurostat. The reading was 2.2% in August.
Escalating Middle East conflict
Prices of WTI and Brent oil rose more than 2.4% as conflict escalated in the Middle East. In a statement released Tuesday, Israel's Defense Forces said they began "ground raids" against "terrorist targets" in southern Lebanon. On the same day, Iran launched a ballistic missile attack on Israel. There were no known fatalities in Israel from the attack.
Widespread effect of port strike
Members of the International Longshoremen's Association started striking Tuesday, halting activity at U.S. East Coast and Gulf Coast ports, which stretch from Maine to Texas. If the strike drags on, global supply chains and the economy could take a beating. That runs the risk of causing inflation to flare up again.
Microsoft's growing investments
In its July annual report, Microsoft said its yet-to-commence finance leases had ballooned to $108.4 billion, up $20.6 billion from the quarter before. A finance lease lets a company pay for an asset over years. Microsoft said in its filing these costs were "primarily for datacenters." Microsoft's capital spending also rose to $19 billion from $14 billion in the March quarter. It's a huge ramp up in spending, but one analyst isn't too fazed about it.
[PRO] Options trade for overbought signs
The S&P finished September on a high, extending its year-to-date gains to 19.7% at the end of Tuesday. There are some indications that can determine if this furious rally has qualities of stocks being overbought. If those conditions unwind, causing the stock market and this key sector to cool off, there's a winning options trade to play.
Money Report
The bottom line
Just when the coast appeared clear, geopolitical tensions and potential supply chain snarl-ups threaten to turn the soft-landing trajectory into a bumpy one.
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Port workers along the U.S. East Coast and Gulf Coast started striking Tuesday. At a port in the New York-New Jersey area, around 100,000 shipping containers "are literally in limbo in the port," said New York Governor Kathy Hochul.
"A disruption of a week or two will create some backlogs but the broader consequences will be minimal," said Adam Kamins, economist at Moody's Analytics.
Should the work stoppage go on for longer, however, "you're running into businesses that have real shortages and, yeah, they'll absolutely have to raise those prices," said Christopher Ball, economics professor at Quinnipiac University.
(Fans of Rao's pasta sauce need not fear, for now. Piper Sandler wrote that Campbell Soup, which bought Rao's earlier this year, "has healthy levels of inventory on hand.")
Meanwhile, oil prices spiked as markets feared Iran, a member of OPEC, would be dragged into a larger conflict in the Middle East. Higher oil prices pose a risk to inflation resurging, or at least slowing less than everyone is hoping for.
With those fears and uncertainties swirling, the Cboe Volatility Index, known as Wall Street's fear gauge, climbed to 19.3 on Tuesday. It closed at 15.4 a week ago. Major U.S. indexes fell, with the tech-heavy Nasdaq suffering the most as megacaps like Tesla, Nvidia and Apple dropped.
It's just the first days of the port strike and flare-up in Middle East tensions, however. The classic safe-haven trades, like bonds, gold and the U.S. dollar, aren't showing up in the prices of those assets yet, noted CNBC's Steve Liesman.
The best-case scenario would be that recent events are just minor turbulence on the way to a soft landing.
– CNBC's Jeff Cox, Fred Imbert, Lori Ann LaRocco, Sean Conlon, Alex Harring and Brian Evans contributed to this story.
