Wall Street suffers from interest rate and Iran concerns: Tech stocks fall, oil prices rise

Wall Street hopes in vain for an early end to the Iran war. After the Iranian president's tough announcement at the United Nations, US investors are now expecting a second interest rate hike by the Fed in October.

Concerns about further rising interest rates and geopolitical tensions caused Wall Street to suffer price losses in the middle of the week. In addition, price losses at tech companies such as Alphabet and Amazon dragged the indices down.

The Dow Jones index of standard stocks closed 0.7 percent lower at 51,511 points. The broader S&P 500 fell 0.75 percent to 7,706 points. The Nasdaq technology exchange index lost 1.1 percent to 26,936 points. According to LSEG data, the S&P 500 is currently trading at nearly 19 times forward earnings, its lowest valuation since 2023.

The conflict between the USA and Iran continued to cause uncertainty. Iranian President Masoud Peseschkian told the United Nations that Tehran would never bow to US pressure. US President Donald Trump had previously threatened Iran again and said he could "wipe out" the country. As a result, oil prices rose almost four percent, boosting the energy sector in the S&P 500. "The stock market wants a resolution to the Middle East conflict," said Lauren Cassidy, chief investor at Founders 100 ETF. "If we don't get this, we will have to live with higher interest rates for longer, and that will further weigh on the stock market."

Fed signals further interest rate hikes

At the same time, strong US economic data drove up government bond yields. Business activity in the US reached its highest level in more than five years in September. Two-year yields rose to their highest since 2024 and 10-year yields rose to their highest since 2007, fueling expectations that the Fed will raise interest rates at its October meeting. Fed Governor Michael Barr signaled that further rate hikes may be necessary because inflation is above the two percent target. According to CME Group's FedWatch tool, traders are now pricing in a 71 percent chance of a rate hike next month.

Investors are now looking to Washington with excitement. Trump will receive Chinese President Xi Jinping there for a three-day visit. This will include, among other things, the extension of the truce in trade, AI regulation and US arms sales to Taiwan.

Alphabet and Amazon weak

When it comes to individual stocks, the focus was on technology companies. The shares of Google parent Alphabet fell by 3.8 percent. Amazon fell by 2.2 percent. The online retailer had previously blocked competitor Meta's new AI assistant "Muse" on its platform. Meta papers, on the other hand, rose by one percent and increased their weekly profit to twelve percent. Analysts said the well-received AI assistant Muse could benefit technology infrastructure providers while posing a challenge for banks and online retailers.

The semiconductor index lost 1.2 percent, with Nvidia losing 1.5 percent. The shares of Expedia and Airbnb each fell by more than seven percent.

Aside from the technology stocks, the shares of the personnel service provider Paychex fell by 8.8 percent after sales in the most important business area missed expectations. The shares of the restaurant chain Cracker Barrel rose by 4.5 percent after surprisingly good sales figures.