U.S. stocks fell Tuesday morning, with analysts blaming rising tensions between the U.S. and China as House Speaker Nancy Pelosi prepared to visit Taiwan.

What’s happening
  • The Dow Jones Industrial Average DJIA fell 285 points, or 0.9%, to 32,512.
  • The S&P 500 SPX was down 26 points, or 0.6%, at 4,093.
  • The Nasdaq Composite COMP shed 62 points, or 0.5%, to trade at 12,307.

Stocks ended a seesaw session slightly lower on Monday, with the Dow falling less than 50 points, or 0.1%, while the S&P 500 lost 0.3% and the Nasdaq Composite ticked down 0.2%.

What’s driving the market

Global equity markets fell as news reports said Pelosi was set to arrive in Taiwan Tuesday night local time, or around 10:20 a.m. ET. Beijing, which sees Taiwan as part of its territory, has threatened “serious consequences” if Pelosi’s visit goes ahead as planned.

“The events schedule is dominated by one question: will U.S. House Speaker Pelosi arrive in Taiwan today as has been flagged, and how will China respond?” wrote Marc Ostwald, chief economist and global strategist at ADM Investor Services International, in a note.

Pelosi would be the highest ranking elected U.S. official to visit the island in 25 years and comes as part of a swing taking the speaker to Singapore, Malaysia, South Korea and Japan for talks on a variety of topics, including trade, COVID-19, climate change and security.

“The U.S. and Taiwan have colluded to make provocations first, and China has only been compelled to act out of self-defense,” Chinese Foreign Ministry spokesperson Hua Chunying told reporters Tuesday in Beijing.

Read: Pelosi leaves Malaysia, tensions rise over Taiwan visit

The White House on Monday criticized Beijing’s response, saying the U.S. “will not take the bait or engage in saber-rattling” and has no interest in increasing tensions with China.

“The most likely outcome is that Pelosi visits Taiwan, there’s some show of force by the Chinese military (like crossing the midpoint of the Taiwan Strait), escalated rhetoric, but no actual conflict,” said Tom Essaye, founder of Sevens Report Research, in a note.

“This outcome won’t derail the rally (as it’s being driven by Fed anticipation). But this is a market that does not need additional headwinds, and escalation in tensions between the U.S. and China will only serve as an additional headwind on stocks—something that won’t reverse the rally but could pile on if the outlook turns less rosy,” he wrote.

The tensions had sparked demand for safe-haven assets, with the yield on the 10-year Treasury note BX:TMUBMUSD10Y sliding in early trade, but recently bouncing back to rise around 2 basis points to 2.628%. Yields and debt prices move opposite each other.

Investors were also paying attention to Federal Reserve speakers. San Francisco Fed President Mary Daly said she found market expectations for policy makers to be “lenient” in upcoming meeting to be perplexing.

In economic data, job openings in the U.S. fell to 10.7 million in June from 11.3 million a month earlier. Openings have dropped three months in a row after peaking in the early spring at a record 11.9 million. The number of people who quit jobs in June, meanwhile, only fell slightly to 4.23 million, the Labor Department said Tuesday.

U.S. stocks rose sharply in July, bouncing back from 2022 lows set in June. Stocks fell into a bear market this year as the Federal Reserve has aggressively raised interest rates in an effort to curb inflation that continues to run at its hottest in around four decades.

See: JP Morgan quant who called summer rebound in stocks says rally could continue even if corporate profits decline

The sharp tightening has stirred recession fears, though stocks have found support on ideas prospects of a slowdown will lead the Fed to slow the pace of rate increases or begin cutting rates in 2023—a prospect that many economists and analysts see as dubious.

Read: Did the stock market peer through ‘rose-colored glasses’ as tech surged in July?

Investors were also weighing another busy day of earnings reports, which have so far come in better than feared.

Companies in focus
  • Shares of Uber Technologies Inc. UBER surged more than 14% after the ride-hailing and delivery services company swung to a second-quarter loss but reported a more than doubling in revenue that beat expectations by a wide margin and became cash-flow positive for the first time.
  • Caterpillar Inc. CAT shares fell 3.1% to lead Dow decliners after the construction and mining equipment maker reported second-quarter profit that beat expectations but sales that came up short, as higher pricing and sales volume were partially offset by unfavorable currency impacts.
  • TD Bank Group TD said Tuesday it would buy investment bank Cowen Inc. COWN for $1.3 billion, or $39 a share, a premium of about 10% over its closing price of $35.49 a share on Monday and a purchase price multiple of 8.1 times Cowen’s estimated 2023 earnings. Cowen shares rose 7.7%, while TD shares declined 0.8%.
  • Pinterest Inc. PINS late Monday missed expectations for earnings and guided for revenue lower than analysts expected in the current quarter, but shares were rallying as users stuck around and activist investor Elliott Management Corp. confirmed a previously reported investment in the company. Pinterest shares rose 12%.
  • Shares of DuPont de Nemours Inc. DD fell 1.4% after the specialty materials and chemicals company reported second-quarter profit and sales that beat expectations but provided a downbeat third-quarter outlook, citing foreign currency headwinds and unplanned downtime at a Virginia site.
  • JetBlue Airways Corp. JBLU fell 6.3% after the airline reported a larger loss than analysts had been expecting. 
  • Sabre Corp. SABR shares rose 3.7% after the online travel company posted a smaller-than-expected second-quarter loss and said it believes the travel recovery is on a long-term uptrend.
  • Hotel operator Marriott International Inc. MAR beat estimates for the second quarter and offered upbeat guidance. Shares were off 1.6%.
Other assets
  • The ICE U.S. Dollar Index DXY, a measure of the currency against a basket of six major rivals, was up 0.4%.
  • The U.S. oil benchmark CL was flat near $93.88 a barrel, while gold futures GC00 rose 0.8% to trade above $1,800 an ounce.
  • Bitcoin BTCUSD slumped 2.2% to trade near $22,780.
  • The Stoxx Europe 600 XX:SXXP fell 0.4%, while London’s FTSE 100 UK:UKX was fractionally higher.
  • China’s benchmark Shanghai Composite CN:SHCOMP ended 2.3% lower, while the Hang Seng Index HK:HSI shed 2.4% in Hong Kong and Japan’s Nikkei 225 JP:NIK declined 1.4%.