Wall Street's 'Uneasy Technical Rebound' Amid War and Interest Rate Expectations

As of the morning of the 31st in Korean time, U.S. stocks closed mixed on the 30th (local time). Having already entered a correction phase last week—with the Dow down 0.9%, the S&P 500 down 2.1% and the Nasdaq off 3.2%—the day’s action amounted to a modest rebound led by oversold names.

At the heart of volatility are geopolitics and interest rates rather than the domestic economy. The conflict with Iran has spread to Yemen’s Houthi rebels, raising fears of a Strait of Hormuz blockade, while oil prices have surged to around $110 a barrel, stoking concerns of renewed inflation. Even after the Federal Reserve held its policy rate at 3.50–3.75%, markets have largely scrapped expectations for rate cuts this year and are even pricing in further hikes, putting added valuation pressure on growth stocks in particular.

By sector, energy and financials outperformed. The S&P 500 Energy index jumped roughly 1.5% intraday as oil rallied, with ExxonMobil and Chevron climbing in tandem. Asset managers such as Blackstone, KKR and Apollo also rose over 1% after the U.S. Labor Department issued guidelines on including alternative assets in 401(k) plans. Conversely, semiconductor and AI-related stocks—already under pressure following Google’s announcement of a memory-optimization algorithm—continued to retrace, amplifying Nasdaq volatility. Morgan Stanley downgraded its view on global equities from overweight to neutral, shifting toward cash and U.S. Treasuries, though it still regards U.S. stocks as relatively defensive versus other regions. Investors should remain cautious, as this week’s consumer-confidence and employment data could further accelerate the downturn in risk appetite and the revaluation of growth shares.