Stocks were under pressure after House Speaker Nancy Pelosi visited the democratically governed island of Taiwan on Tuesday, a move which has led to rising tensions with China and that has rattled investors concerned about additional geopolitical uncertainty in markets.
Stocks finished lower: The Dow Jones Industrial Average was down 1.2%, nearly 400 points, while the S&P 500 lost 0.7% and the tech-heavy Nasdaq Composite 0.2%.
Investor sentiment took a hit after a rising number of Federal Reserve officials dismissed recent optimism about an upcoming “pivot” in monetary policy and warned that the central bank would need to keep aggressively raising rates to battle inflation.
Global markets also fell on Tuesday ahead of a planned visit to Taiwan by US House Speaker Nancy Pelosi (D-Calif.), which is the first visit to the island by an official in her position since Newt Gingrich in 1997.
Pelosi arrived in Taiwan on Tuesday evening local time to meet with government officials there, despite the Chinese government warning her not to do so and threatening “strong countermeasures.”
China has historically claimed Taiwan as part of its territory: In addition to condemning Pelosi’s upcoming visit, Beijing has sent several warplanes to buzz the dividing line of the Taiwan strait in a show of force.
Chinese stocks also moved lower on Tuesday amid the rising tensions, with the Shanghai Composite index and Hong Kong’s Hang Seng index both falling more than 2%, while big name stocks like Baidu and NetEase each fell roughly 4%.