U.S. stocks declined on Tuesday as renewed concerns about the Middle East war outweighed early optimism over solid corporate earnings, with the Dow Jones Industrial Average falling 167.35 points, or 0.34%, to 49,275.21, the S&P 500 losing 28.10 points, or 0.4%, to 7,081.01, and the Nasdaq Composite dropping 69.58 points, or 0.28%, to 24,334.82. According to Reuters, the indexes were in positive territory earlier in the session before the decline. The Israeli military said Lebanon's Iran-aligned Hezbollah had fired several rockets toward its troops operating in southern Lebanon, in what it described as a "blatant violation" of the ceasefire agreement. Pakistan is awaiting a formal response from Iran to confirm it will send a delegation to attend a second round of peace talks with the U.S. in Islamabad, with plans for U.S. Vice President JD Vance to travel to the region for talks on hold without Iranian confirmation. In an interview with CNBC, U.S. President Donald Trump said he does not want to extend the ceasefire with Iran, which is set to expire soon, as stocks have rallied in recent weeks on the belief that a peace deal was likely in the near future.
Despite Middle East tensions, optimism around AI and upbeat earnings have cheered investors, with first-quarter growth expectations of around 14%, according to LSEG data. J.P. Morgan raised its year-end target for the S&P 500, citing AI and tech-driven earnings, while Amazon said on Monday it will invest up to $25 billion in Anthropic, signaling megacap companies are still willing to spend massively on the AI technology. Amazon shares rose 1.2% following the announcement. The S&P 500 energy index rose more than 1% as the sole gainer among the major S&P sectors due to another jump in crude prices on Middle East tensions. UnitedHealth jumped nearly 9% after the healthcare conglomerate raised its annual profit forecast and beat Wall Street expectations for the first quarter, accounting for more than 176 points to the upside for the Dow. Apple shares also garnered attention, down 2.4% after the company said CEO Tim Cook would hand over the reins to longtime hardware boss John Ternus.
Earlier economic data from the Commerce Department showed U.S. retail sales increased more than expected in March as the war with Iran boosted gasoline prices and led to a record surge in receipts at service stations. Retail sales jumped 1.7% last month, the largest rise since March 2025, after an upwardly revised 0.7% gain in February and above the 1.4% estimate of economists polled by Reuters. According to Reuters, the war with Iran boosted gasoline prices and led to a record surge in receipts at service stations. The S&P 500 posted 50 new 52-week highs and four new lows while the Nasdaq Composite recorded 140 new highs and 47 new lows. Declining issues outnumbered advancers by a 2.3-to-1 ratio on the NYSE and by a 2.1-to-1 ratio on the Nasdaq.
Investors were digesting comments from Kevin Warsh, Trump's nominee to lead the Federal Reserve, whose confirmation hearing wrapped up in the Senate on Tuesday. As reported by Reuters, Warsh called for "regime change" at the U.S. central bank that would include a new "framework" for controlling inflation and a possible overhaul of how it communicates with the public about monetary policy. Republican Senator Thom Tillis has promised to block Warsh's confirmation until the Department of Justice ends an investigation into current Fed Chair Jerome Powell that Tillis says threatens the central bank's independence. The impasse could impact monetary policy, especially as Trump has vowed to fire Powell if he does not leave when his term ends in May. Fed funds futures have swung from pricing in two quarter-point cuts by December to virtually none since the war started in late February.
The coming week brings significant corporate earnings, with Tesla headlining a packed schedule of U.S. corporate earnings. According to The Economic Times, March retail sales data could shed light on whether higher prices are hurting consumer spending, with Tuesday's update expected to post a strong gain of over 1% month-over-month in nominal terms. Additionally, first-quarter earnings, especially in imported energy-dependent Europe, are showing airlines, retailers and manufacturers grappling with deep uncertainty that could weigh on profits. The week will also feature March surveys showing a steep rise in input costs and a slowdown in overall business activity as firms grapple with volatile energy markets and disrupted supply chains. Wall Street is also in the midst of corporate earnings season, with about 10% of companies in the S&P 500 having reported and 88% having delivered positive surprises on earnings per share, a measure of profitability. Corporate America continues to broadly deliver robust revenue, helping drive the market higher, with the Nasdaq hitting its first record high since late October and the S&P 500 closing above 7,100 points for the first time ever Friday.
