On Tuesday, the S&P 500 ended the day lower after seesawing throughout the session, as geopolitical tensions rose after the visit of US House of Representatives Speaker Nancy Pelosi to Taiwan.
According to Pelosi, her visit was a demonstration of American solidarity with the self-ruled island that has been claimed by China.
However, Beijing condemned the visit and called it a threat to stability and peace.
The S&P 500 declines
The S&P 500 index was weighed down by some heavy hitters like Visa and Microsoft and the day saw all 11 sectors of the index lose ground, with real estate leading the charge in losses.
There was also a mixed response in semiconductor shares with exposure to China. There was a rally in Advanced Micro Devices, as it was on schedule to post its quarterly report just after the session end.
There was a fall in Caterpillar, as the industrial bellwether fell after it warned of a bigger decline in the demand in China for its excavators.
China is dealing with a property crisis and the industrial bellwether also has had to deal with supply-chain bottlenecks.
Recent months have seen financial markets suffer because of the financial conditions, the red-hot inflation and the war between Russia and Ukraine.
June saw a decline in job openings in the US by the highest number in two years, as the wholesale trade and retail industries saw the demand for workers soften.
The labor market was tight for the most part. In July, the US Federal Reserve hiked its interest rate by three-quarters of a percentage point and investors are speculating if aggressive hikes are now over.
Market analysts said that investors will have to get very comfortable knowing that all hikes have been priced in, but this is an open question for now.
This is because there are still supply chain constraints and other challenges and they have not been completely eliminated.
Most of the session saw shares of US defense companies rally, including L3Harris Technologies Inc., Northrop Grumman Corp, Lockheed Martin Corp and Raytheon Technologies Corp.
The United States is the main arms supplier and supporter of Taiwan. Preliminary data showed that there was a 0.65% drop in the S&P 500, as it lost 26.78 points to reach 4,901.85 points.
There was also a 0.16% drop in the Nasdaq Composite, which saw a fall of 19.48 points to come down to 12,349.49.
A 1.21% drop was also seen in the Dow Jones Industrial Average that lost 397.29 points to reach 32,401.11.
The second quarter earnings season has been mostly upbeat and has given support to the markets of late, with the S&P 500 climbing 12% from the lows it had reached back in June.
There was also a rise in Uber Technologies after the ride-hailing company saw its cash flow turn positive for the first time and also forecast an upbeat operating profit for the third quarter.
Tesla Inc. also rose after its price target was hiked by Citigroup.