Stocks declined Tuesday after House Speaker Nancy Pelosi landed in Taiwan’s capital of Taipei amid a. She and other members of Congress were greeted by a contingent of Taiwanese officials on the tarmac.
In a statement shortly after the plane landed, Pelosi said her visit was meant to honor “America’s unwavering commitment to supporting Taiwan’s vibrant Democracy.”
The S&P 500 fell 27 points, or 0.7%, to close at 4,091. The Dow Jones industrials declined 1.2% and the Nasdaq lost 0.2%.
“Speaker Pelosi’s visit to Taiwan opens a dangerous period for U.S.-China-Taiwan tensions that will add to and elevate market risk as events unfold,” Raymond James Equity Research analysts and Alex Anderson said in a report. “We expect an ongoing series of responses by China over the coming days and weeks, but the overall trajectory is likely to be an avoidance of significant escalation, in our view.”
China sees Taiwan as its own territory and has repeatedly warned of “serious consequences” if the reported trip to the island democracy by the House speaker, who is second in the line of succession to the U.S. presidency, goes ahead. Pelosi has said she is visiting Singapore, Malaysia, South Korea and Japan for talks on a variety of topics, including trade, COVID-19, climate change and security.
Pelosi is the highest-ranking elected U.S. official to visit in more than 25 years.
Meanwhile, high inflation continues to drag on markets along with the potential for further interest rate hikes from central banks that could unintentionally push economies into a recession.
More than half of the companies in the S&P 500 have reported their latest earnings results, which have been mostly better than expected. However, companies have also warned that inflation is weighing on customer spending and squeezing operations. Businesses have been raising prices to try to keep up profits.
A surge in oil prices throughout the year only worsened the impact from inflation. U.S. crude oil prices are up roughly 25% in 2022 and that has raised gasoline prices in the U.S. to record levels.
Uber jumped nearly 19 % after the ridesharing company said rides increased by 24% and revenue more than doubled in the second quarter as as Americans headed back to offices and are going out more as anxiety over COVID-19 eases.
BP shares rose 1% after the British energy giant reported that its earnings tripled in the second quarter as it profited from oil and natural gas prices that soared after Russia invaded Ukraine.
Wall Street is also preparing for an update on the job market, which has remained strong. The Labor Department will release its closely watched monthly employment report for July on Friday.
In energy trading, benchmark U.S. crude gained 67 cents to $94.56 a barrel in electronic trading on the New York Mercantile Exchange. Brent crude, the international standard, rose 52 cents to $100.55 a barrel.