By Stephen Culp and Niket Nishant
NEW YORK, Sept 1 (Reuters) - U.S. stocks extended their slide on Tuesday, as the global bond selloff deepened and crude prices resumed their climb amid dimming hopes for a near-term solution to the U.S.-Israeli war with Iran.
All three major U.S. stock indexes began the new month lower, with rising hostilities in the Middle East driving up oil prices. Global sovereign debt yields rose to multi-year highs as markets increased their bets that central banks will need
to hasten their interest rate hikes.
The benchmark U.S. Treasury yield continued to edge higher after reaching a 19-month high on Monday.
Seasonal weakness could also be weighing on investor sentiment. September is the only month with a negative average return since 1926, according to Fisher Investments, which cited data from Finaeon.
"We're nearing the fall, and the problem with the fall is you have very few earnings reports," said Jay Hatfield, portfolio manager at InfraCap in New York. "Generally speaking, good news about the stock market comes from the companies, and bad news comes from everything else."
Reports that the U.S. Air Force was striking Iranian targets around the Strait of Hormuz followed Treasury Secretary Scott Bessent's remarks that Washington will probably announce new bank sanctions against Iran to "economically asphyxiate" Tehran's leadership. But Iran warned it would prevent oil exports from the Gulf.
A HAWKISH FED SEEN HIKING RATES IN SEPTEMBER
The ramp-up of hostilities drove crude prices higher, further exacerbating inflation fears just days after U.S. Federal Reserve Chair Kevin Warsh said he would bring price growth back to the central bank's target.
Financial markets are pricing in a 68.2% likelihood that the Fed will implement a 25-basis-point rate hike at the end of next month's policy meeting, up from 39.6% a week ago, according to CME's FedWatch tool.
"We have a very, very hawkish Fed, and they absolutely want to raise rates," Hatfield added. "They want to demonstrate their independence from the administration."
The U.S. Labor Department's JOLTS report showed jobs market churn slowing, while Purchasing Managers' Index data suggested factory activity is losing momentum and spending on residential construction is falling. Each report points to high prices, supply constraints and uncertainties arising from tariffs and geopolitical strife.
The Dow Jones Industrial Average fell 431.78 points, or 0.81%, to 52,754.13, the S&P 500 lost 52.88 points, or 0.69%, to 7,633.26 and the Nasdaq Composite gave up 256.93 points, or 0.97%, to 26,113.77.
Of the 11 major sectors in the S&P 500, energy led the gainers with a boost from crude prices. Consumer discretionary shares suffered the largest percentage loss.
The Dow Jones Transportation Average, widely viewed as a barometer of economic health, was among the session's biggest laggards, sliding 2.5%.
The Philadelphia SE Semiconductor index dipped 2.5% to a near one-month low.
Nvidia, Intel and AMD were off between 1% and 3.2%.
Declining issues outnumbered advancers by a 2.7-to-1 ratio on the NYSE. There were 116 new highs and 327 new lows on the NYSE.
On the Nasdaq, 1,280 stocks rose and 3,403 fell as declining issues outnumbered advancers by a 2.66-to-1 ratio.
The S&P 500 posted nine new 52-week highs and 12 new lows while the Nasdaq Composite recorded 22 new highs and 140 new lows.
(Reporting by Stephen Culp in New York, Niket Nishant and Utkarsh Hathi in Bengaluru; Editing by Maju Samuel and Rod Nickel)
