• Wall Street saw a downturn due to traders scaling back bets for Federal Reserve interest-rate easing and geopolitical tensions in the Middle East.
• U.S. Treasury yields rallied, indicating a positive economic outlook, but concerns over the impact of conflict on oil prices persist.
• Tech sector woes and the potential impact of Hurricane Milton added to market volatility.
• Investors are now closely watching upcoming economic data, earnings reports, and global developments to gauge the market's trajectory.

Wall Street experienced a significant downturn on Monday, with the three major indexes - the Dow Jones Industrial Average, S&P 500, and Nasdaq Composite - all closing down by around 1%. This was largely due to traders scaling back bets for Federal Reserve interest-rate easing, following a stronger-than-expected jobs report released on Friday. The report led traders to pull back from bets for a 50-basis-point rate cut in November, with an 86% chance of a 25-basis-point cut and a roughly 14% chance the central bank would not cut rates at all, according to the CME's FedWatch tool.

This change in rate-cut expectations caused U.S. Treasury yields to rally, with the yield on benchmark 10-year notes exceeding 4% for the first time in two months. This is a significant shift, as Treasury yields are a key indicator of investor sentiment towards the economy. A rise in yields typically signals a positive outlook, as it suggests investors are willing to accept lower returns in exchange for the perceived safety of government bonds.

However, the market's downturn was not solely due to economic factors. Geopolitical tensions in the Middle East also played a role, with investors concerned about the potential impact of the conflict on oil prices. The ongoing conflict has led to a rise in oil prices, which could have a knock-on effect on inflation and economic growth. This is a concern for U.S. investors, who are worried about the war's economic impact.

Tech Sector and Natural Disasters Add to Market Woes

Adding to the market's woes was an order from a U.S. judge for Alphabet's Google to overhaul its mobile-app business to give Android phone users more options. This news led to selling of shares in major tech companies like Amazon and Apple, further dampening market sentiment.

Investors are also bracing for another big hurricane, Milton, which is expected to hit the United States this week. This comes on the heels of Hurricane Helene, a Category-4 storm that killed more than 200 people across six states. The potential impact of another major storm could further disrupt the economy and add to the market's current volatility.

Looking ahead, investors are waiting for the Consumer Price Index (CPI) inflation reading for September and the start of the third-quarter earnings season, with reports from banks due this week. These events could provide further insight into the health of the economy and potentially influence the Federal Reserve's decision on interest rates.

Historical Parallels and Future Outlook

This recent market downturn echoes similar events in history. For instance, in October 2008, during the global financial crisis, Wall Street experienced one of its worst weeks in history, with the Dow Jones Industrial Average falling by more than 18%. This was largely due to fears of a global recession and uncertainty about the effectiveness of government measures to stabilize the economy.